24Q1 performance highlights: The profit side all exceeded expectations, and the company announced 24Q1 results with remarkable results in cost reduction and efficiency. 2024Q1 achieved operating revenue of 29.41 billion yuan, an increase of 16.6% over the previous year; non-IFRS adjusted net profit of about 4.39 billion yuan, which greatly exceeded Bloomberg's agreed expectations, and profits continued to be released.
The gross margin of the 24Q1 company increased year-on-year, mainly due to a decrease in the company's bandwidth expenses and server costs; 24Q1's sales expenses were 9.38 billion yuan, and the sales expenses rate fell 2.7 pct to 31.9% year on year. The year-on-year downward trend was obvious. The R&D expenses rate and management expenses ratio were 9.7% and 1.6% respectively; the year-on-year decrease was 1.9 percentage points and 2 percentage points, with remarkable results in cost reduction and efficiency. We believe that the company's core business revenue is growing strongly, and the results of cost reduction and efficiency are remarkable. The company may gradually enter a profit release period. It is recommended to continue to monitor the trend of increasing the company's profit margin.
Traffic side: The average daily active users/monthly active users of the 2024Q1 Kuaishou app increased slightly, and the average daily active users/monthly active users of the 2024Q1 app increased 5.2%/6.6% year over year; the average daily usage time of each daily active user was 129.5 minutes, up 2.1% year over year, total usage time of 24Q1 users increased 8.6% 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: The number of advertisers grew rapidly, and the revenue growth rate recovered beyond expectations in 2024Q1. The company achieved online marketing revenue of 16.65 billion yuan, an increase of 27.4% over the previous year, mainly due to strong growth in circular advertising within the company and the continuous recovery of advertising with external circulation effects. 2024Q1, the number of active marketing customers on the platform increased by nearly 90% year over year; 2024Q1 continued to recover in circulation marketing advertising outside the company, and achieved continuous growth in media information (skits), education and training, games and other industries. The company's internal circular advertising is growing strongly, and internal circulation advertising revenue has achieved more than GMV growth. In 24Q1, the total consumption of merchants using sitewide promotion products and intelligent promotion products reached 30% of the total internal circulation consumption; looking ahead to Q2, we expect that the company's internal circular advertising will maintain a strong growth trend, and external circular advertising is still expected to achieve double-digit year-on-year growth.
Other service revenue (including e-commerce): MAC continues to increase, and the GMV share of pan-shelf shelves is expected to increase steadily in 2024Q1. The company's other service revenue increased 47.6% year on year to 4.18 billion yuan, and Kuaishou e-commerce's GMV reached 288.07 billion yuan, up 28.2% year on year. On the supply side, the average number of merchants sold by 2024Q1 per month increased 70% year over year; at the same time, the company greatly optimized and upgraded the platform's investment policy, providing investment incentives for small and medium-sized merchants through the Dow Fund policy, empowering small and medium-sized merchants in various aspects such as security deposit, traffic, distribution, and training. On the demand side, the number of monthly active buyers of 2024Q1 was about 126 million, up 22.4% year on year; during the New Year's Festival, the number of buyers increased by more than 60%; looking ahead to Q2, we believe that as the company's mall scenario gradually progresses, the share of pan-shelf GMV is or will continue to increase (2024Q1 GMV accounts for about 25%), and the company's GMV is expected to grow 25% year-on-year in Q2 and this year;
Live streaming rewards business: the number of signed associations and anchors is growing steadily
2024Q1's live streaming revenue was 8.58 billion yuan, a year-on-year decrease of 8%. In 24Q1, the number of guild organizations signed up on the platform increased by 50% year on year, and the number of signed guild anchors increased 50% year over year; under the “live streaming +” ecosystem, the average number of daily resume delivery times increased by more than 180% year on year, and the average number of daily delivery users increased by more than 120% 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 2024Q1, the company's overseas business achieved revenue of 991 million yuan, an increase of 193.2% year-on-year, and further narrowing of month-on-month losses; 2024Q1 overseas business marketing revenue increased nearly threefold year-on-year. 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 stricter regulation of live streaming rewards, we lowered the company's 2024-2025 revenue to 1271/142.4 billion yuan (value was 129.3 billion yuan 24 years ago), respectively; considering the obvious trend of increasing the company's profitability and significant cost reduction and efficiency results, we raised the company's adjusted net profit for 2024-2025 to 173/26.8 billion yuan (15.8 billion yuan 24 years ago), respectively, to maintain the “buy” rating.
Risk warning: The growth in the number and length of time of Kuaishou users fell short of expectations; the review of live streaming content became stricter; the increase in the number of e-commerce paying users and repurchase rate fell short of expectations; overseas business expansion and commercialization monetization fell short of expectations.