KUAISHOU-W Q4 Earnings Report Preview: Stronger Growth Momentum than the Industry, Profit Growth May Exceed Expectations Again

Several institutions have recently released a forward-looking report on KUAISHOU-W's performance in the fourth quarter of 2023. According to the analysis, KUAISHOU-W's core business is showing resilient growth, with user scale and usage time remaining high. As a result, the company's revenue and profit are expected to exceed market expectations, leading to a general "buy" rating. Thanks to the sales peak during the "Double 11" and "Double 12" shopping festivals, Goldman Sachs believes that KUAISHOU-W's e-commerce GMV is expected to achieve a strong YoY growth of nearly 30% in the fourth quarter. In addition, the incremental growth brought by shelf e-commerce is significant, estimated to account for more than 20% of the overall GMV. GF SEC also believes that KUAISHOU-W has performed well in its core business during the e-commerce peak season, with continued strong growth in e-commerce internal circulation advertising. Previously released official data from KUAISHOU-W showed that during the "Double 11" period, the total number of orders increased by nearly 50%, the number of sold products increased by over 50%, GMV for small and medium-sized merchants increased by 75% YoY, and GMV for brands increased by 155% YoY. Furthermore, during the same period, GMV for shelf products increased by 160% YoY, and GMV from search transactions increased by 146%. One noteworthy change is that an increasing number of brands and small and medium-sized merchants have achieved significant growth during the "Double 11" period on KUAISHOU-W. Behind this, the "Chuanliu Plan," which encourages collaboration and win-win cooperation between merchants and influencers, has built a dual-cycle flow model combining self-broadcasting and distribution. This model generates incremental traffic by increasing the flow between merchants. In the shelf product category, KUAISHOU-W's online mall has opened up a primary entrance for traffic, and "big brands" are distributed in various scenes such as the mall channel, buyer homepage, search, and recommendations, helping merchants gain opportunities for overall growth. Several institutions believe that driven by the rapid growth of e-commerce in the fourth quarter, KUAISHOU-W's advertising business will continue to maintain a growth momentum that exceeds the industry average throughout the year. In the third quarter of last year, against the backdrop of a relatively flat advertising and e-commerce market, KUAISHOU-W's online marketing services (advertising) revenue reached RMB 14.69 billion, a YoY increase of 26.7%. At the same time, the number of active marketing clients increased by over 140% YoY. During the "Double 11" period, KUAISHOU-W's magnetic engine promoted three main products: new customer growth, site-wide promotion, and live streaming hosting, covering important stages from the pre-sale period to the peak period, helping merchants achieve more efficient traffic reach and sales growth. According to QuestMobile's "2023 China Internet Core Trends Annual Report," new media channels with higher content extension and user interactivity are increasingly valued by advertisers. Short video and live streaming social platforms such as KUAISHOU-W are still experiencing significant growth in advertising revenue. In September 2023, among the top 10 media in terms of China's internet advertising revenue share, KUAISHOU-W ranked second and had the fastest growth rate. According to Daiwa, KUAISHOU-W's external advertising in the fourth quarter is expected to continue the warming trend of the previous quarters, achieving double-digit year-on-year growth. In addition to the promising fields of vocational education and healthcare that the company is expanding into, small games and short dramas play an important role in commercial growth. Taking short dramas as an example, as of the end of 2023, KUAISHOU-W's daily active users (DAU) for short dramas reached 270 million, with 94 million heavy users who watch more than 10 episodes every day. The number of short drama content creators on the KUAISHOU-W platform also exceeded 100,000 during the same period. In terms of brand advertising, KUAISHOU-W collaborated on more than 30 short dramas throughout 2023, with repeat brands accounting for nearly 40% of the total, and the cumulative playback volume of commercial short dramas reaching 8.6 billion. Furui believes that the short drama industry is in a period of rapid growth, and KUAISHOU-W plays a leading role in the industry, providing multidimensional support for content creators. From a commercial perspective, KUAISHOU-W pursues a closed-loop commercial ecosystem, which allows commercial clients of short dramas to continuously accumulate target customers through data insights and ROI feedback. In addition, based on diverse content supply, product features deeply integrated with the industry, and a thriving business atmosphere, multiple institutions predict that KUAISHOU-W's user base will continue to grow steadily. Looking ahead, CICC believes that in the current uncertain external environment, KUAISHOU-W can enjoy advantages in industry track and business structure, demonstrate internal driving force, and enhance its own performance certainty, making it a better choice within the sector and giving it a "outperform the industry" rating.