Description of the event

Kuaishou announced financial results for 2024Q3. Kuaishou achieved revenue of 31.131 billion yuan in 2024Q3, up 11.4% year on year; non-GAAP net profit of 3.948 billion yuan, up 24.4% year on year. By market, 2024Q3's domestic business operating profit was 3.505 billion yuan, up 11.1% year on year; overseas business operating loss was 0.153 billion yuan, narrowing 75.9% year over year.

Incident comments

Revenue side: 1) Kuaishou 24Q3 achieved online marketing service revenue of 17.634 billion yuan, a year-on-year increase of 20.0%, accounting for 56.6% of total revenue. The advertising system was continuously optimized based on the AI model, and the customer penetration rate of the company's intelligent marketing products gradually increased. External circulation revenue became the main driving force for revenue growth, and 2024Q3 skit marketing consumption increased by more than 300% year-on-year. Revenue from internal circulation marketing services has maintained steady growth, and the number of monthly sales investors has increased by more than 50% over the same period last year.

2) Kuaishou 24Q3 achieved live streaming revenue of 9.338 billion yuan, a year-on-year decrease of 3.9%. The decline was narrower than the previous quarter, accounting for 30.0% of total revenue. By the end of the 3rd quarter of '24, the number of associations signed up by the company had increased by more than 40% year on year, and the number of signed anchors had increased by more than 60% year on year. At the same time, the company focuses on game live streaming content marketing, with more than 30 million active authors of 2024Q3 game live streaming. 3) Kuaishou 24Q3 achieved revenue of 4.159 billion yuan from other services (including e-commerce), an increase of 17.5% over the previous year, accounting for 13.4% of total revenue. Mainly due to the continued growth of the company's e-commerce business, guided by the core strategy of “good content+good products”, the GMV of 2024Q3 Kuaishou reached 334.2 billion yuan in the third quarter, an increase of 15.1% over the previous year. Among them, the average daily matching GMV for small to medium experts increased by more than 40% month-on-month, GMV, which led short videos to live broadcast transactions, increased by nearly 40% month-on-month, and pan-shelf accounts for total e-commerce GMV increased to 27%. On the supply side, the average number of sellers per month increased by more than 40% over the same period last year. On the demand side, the company's average number of e-commerce buyers rose to 0.133 billion, up 12.2% year on year, up from month to month.

Operating data: Kuaishou's user scale achieved the company's mid-term target, breaking 0.4 billion for the first time. In 24Q3, Kuaishou's average daily active users increased 5.4% year over year to 0.408 billion, and average monthly active users increased 4.3% year over year to 0.714 billion. The DAU and length of time in key overseas markets increased steadily. Among them, daily active users in Brazil increased 9.7% year on year, and the average daily time length of daily active users increased 4.2% year over year.

Profit side: Thanks to high-margin online marketing services and increased e-commerce business share, cost control and optimization, etc., 2024Q3 Kuaishou achieved a gross margin of 54.3% and an adjusted net interest rate of 12.7%. +2.6 pct/+1.3 pc compared to the same period, respectively.

There was a slight month-on-month decline, -1.0pct/-2.4pct, respectively. 2024Q3's R&D expenses increased 4.5% year over year to 3.1 billion yuan, mainly due to increased employee welfare expenses. 2024Q3's sales and marketing expenses increased 15.9% year-on-year to 10.4 billion yuan, mainly due to increased subsidies for paid skits and e-commerce services.

AI empowers and improves efficiency: AI technology continues to empower the advertising business. 2024Q3 consumes more than 20 million yuan per day on AIGC marketing materials from marketing customers. Keling AI continues to lead the way through more than ten iterations and upgrades. The users have exceeded 5 million, generating over 51 million videos and over 0.15 billion images.

Profit prediction: Kuaishou makes full use of AI technology to enable multiple business scenarios to improve efficiency and deepen high-quality growth strategies. We expect revenue of 2024-2025 to reach 127.1 billion yuan and 139.7 billion yuan, respectively, and non-GAAP net profit of 17.7 billion yuan and 21.7 billion yuan, respectively, maintaining a “buy” rating.

Risk warning

1. The market competition pattern intensifies risks;

2. Content regulation risks.