24Q2 performance highlights: The profit side exceeded expectations, and the company announced 24Q2 results with remarkable results in cost reduction and efficiency. 2024Q2 achieved operating income of 30.98 billion yuan, an increase of 11.6% year over year, exceeding Bloomberg's agreed expectations; non-IFRS adjusted net profit of about 4.68 billion yuan, exceeding Bloomberg's unanimous expectations, and profits continued to be released. The gross margin of the 24Q2 company increased year-on-year, mainly due to an improvement in the company's revenue structure and a decrease in the share of the company's bandwidth expenses and server costs; 24Q2's sales expenses increased by 1.3 pct to 32.4% year on year, mainly due to an increase in e-commerce and other business promotion investment. The R&D cost rate and management cost ratio were 9.1% and 2.6% respectively; the year-on-year decrease of 2.3 percentage points and 0.8 percentage points, with significant cost reduction and efficiency results. We believe that the company's core business revenue is growing steadily, and the results in cost reduction and efficiency are remarkable. We recommend continuing to pay attention to the trend of increasing the company's profit margin.
Traffic side: User traffic increased steadily. The average daily active users/monthly active users of the 2024Q2 Kuaishou app increased slightly year-on-year to 0.395 billion/0.692 billion, respectively; the average daily usage time of each daily active user was 122 minutes, up 4% year on year, and the total usage time of 24Q2 users increased 9.5% year on year, and user traffic increased steadily. Looking forward to the future, we believe that the company's single user acquisition and retention costs may be continuously optimized, and user acquisition ROI is expected to further increase.
Online marketing business: External circulation advertising grew strongly, and revenue growth exceeded expectations in 2024Q2. The company achieved online marketing revenue of 17.5 billion yuan, an increase of 22.1% over the previous year, mainly due to significant growth in external circulation advertising and steady growth in internal circulation advertising. Judging from the external circulation, the growth rate of 24Q2 compared to Q1 is accelerating, with media information, e-commerce platforms, local lifestyle and other industries growing significantly. 2024Q2, the penetration rate of the company's external circulation advertising product UAX in various industries continues to increase, and UAX marketing consumption accounts for more than 30% of the total external circulation consumption; judging from internal circulation, the total consumption of 24Q2 merchants using sitewide promotion products and intelligent promotion products reached 40% of the total internal circulation consumption; looking ahead to Q3, we expect the company's external circulation advertising to maintain a strong growth trend, and internal circulation advertising is still expected to synchronize with GMV's growth rate.
Other service revenue (including e-commerce): GMV growth has slowed, and the share of GMV on the pan-shelf is expected to increase steadily in 2024Q2. The company's other service revenue increased 21.3% year on year to 4.2 billion yuan, and Kuaishou e-commerce GMV reached 305.25 billion yuan, up 15% year on year. The slowdown in growth is mainly due to the impact of the macro environment combined with intense competition during the Q2 e-commerce peak season. On the supply side, the average number of monthly active sellers of 2024Q2 increased by more than 50% year on year. For small and medium-sized merchants, the company helped new merchants quickly expand their scale through the launch plan and support plan; on the demand side, the number of monthly active buyers of 2024Q2 was about 0.131 billion, up 14.1% year on year, and the monthly active user penetration rate reached 18.9%; looking ahead to Q3, we believe that as the company's mall scenario gradually progresses, the share of pan-shelf GMV will continue to grow in oversized markets (2024Q2 GMV accounts for more than 25%) The year-on-year GMV growth rate is expected to reach 17% for the whole year;
Live streaming rewards business: the number of signed associations and anchors is growing steadily
2024Q2's live streaming revenue was 9.3 billion yuan, down 6.7% year on year, and the decline was narrower than in Q1.
By the end of the second quarter, the number of guild organizations signed up on the platform increased by 50% year on year, and the number of signed guild anchors increased 60% year over year; under the “live streaming +” ecosystem, the average number of daily resume submissions for the quick hire business increased by more than 130% year on year. Looking forward to the future, we think the company can meet user needs in different scenarios and further optimize the live streaming ecosystem through rich product forms (quick hire, ideal home, etc.).
Overseas business: ROI drives growth, and pursues commercialization in core regions. In 2024Q2, the company's overseas business achieved revenue of 1.1 billion yuan, up 141.4% year on year, and further narrowing month-on-month losses; 2024Q2 overseas business marketing revenue increased by more than 200% year on year and continued to increase from month to month. We believe that based on the company's overseas ROI-driven growth model, the company will invest key resources in key countries where users are concentrated, the ecology is more mature, and commercial monetization can be initiated.
Investment advice: Considering the slowdown in e-commerce GMV growth, we lowered the company's 2024-2025 revenue to 126.9/136.7 billion yuan (value before 24/25 was 127.1/142.4 billion yuan); considering the increase in the company's short-term investment, we lowered the company's adjusted net profit for 2024-2025 to 17.4/23.2 billion yuan respectively (17.3/26.8 billion yuan before 24/25) to maintain “buying” “Enter” rating.
Risk warning: The growth in the number and length of Kuaishou users fell short of expectations; the review of live streaming content became stricter; the increase in the number and repurchase rate of e-commerce paying users fell short of expectations; overseas business expansion and commercialization fell short of expectations.