Kate Lin: Kuaishou Technology (01024) saw solid home appliance sales during China’s mid-year shopping festival. This is welcome news for investors, especially amid this rough year the Chinese internet sector has been having so far.
Kuaishou is a short-video platform but has continued its expansion into e-commerce. In China, livestream e-commerce, with its immersive and interactive experience, has become popular. Not only Kuaishou, but its rival Douyin is also commercializing its massive but growing user base.
For Kuaishou, its target demographics is tier-3 cities and below, where 65% of its users are from. This implies that the user base is less affluent, which may influence advertising decisions from key accounts.
Our fair value estimate for Kuaishou is HK$ 70. This valuation reflects its daily active users to reach 400 million users in 2024, there is some optimism that it could increase slightly beyond this level given rival Douyin has 600-700 million active users per day.
Shares in Kuaishou are now trading around 25% upside and have a 4-star rating.
For Morningstar, I am Kate Lin.
Bulls Say
- Dominant positions in lower-tier cities may benefit Kuaishou eventually as disposable income grows per capita in China.
- The ad load remains low for Kuaishou compared with peers, which should imply lower saturation and an easier path to increase advertising revenue.
- Livestream e-commerce is growing faster than traditional e-commerce in China; Kuaishou could end up as a market leader in the niche.
Bears Say
- Competitive risk is very high given Kuaishou’s trailing position to the leader compounded with emerging peers.
- Livestreaming e-commerce is closely related to traditional livestreaming, which is saturated with competitors and where users can also be fickle.
- A less affluent user base may deter advertisers from viewing Kuaishou as a priority amid the social media landscape.
.jpg "Kate Lin")
