As a leader in short-video and live streaming, Kuaishou is expected to surf on the growing industry tailwinds, with authentic content and engaged community. We expect its rev to grow at 40% CAGR in FY20-23E, driven by user expansion, monetization diversification and tech enhancement. Initiate with BUY with DCF-based TP at HK$382. Kuaishou is still at high growing stage, its ads & e-commerce monetization and new initiatives could unlock its TAM and valuation.
- A short-video leader with vibrant & engaged community. Kuaishou ranked Top 1 in live streaming and Top 2 in short video and live streaming e-commerce in Sep 2020, according to iResearch. With Kuaishou’s sizable users (305mn DAU) and vibrant & engaged community, we forecast its rev to surge at 40% CAGR in FY20-23E, backed by user expansion and stepping-up monetization.
- Bullish on user upside with industry tailwinds and authentic content. We expect Kuaishou to surf on the entertainment tailwinds, with ads/ live streaming/ e-commerce mkt size growing at 34%/20%/58% CAGR in 2019-2025E, according to iResearch. Kuaishou excels itself with authentic content ecosystem, engaged community with interest-based sharing and traffic distribution. We are bullish on its user upside, and expect its MAU/DAU to grow at 12%/13% CAGR in FY20-23E. Its strong user stickiness and trusted sociality would build high barrier and help it continuously gain share.
- Multiple monetization levers to unlock its TAM. By leveraging its sizable data and analytics capability, we believe Kuaishou can further enhance its monetization with richer content and better matching. We see high visibility for Kuaishou to continuously gain share on time spent, and keep steady live streaming growth with deeper penetration and rising ARPU. Online marketing services would be the primary driver, backed by KA expansion, rich ads formats and better targeting. E-commerce would further unlock its TAM, with estimated GMV of RMB788bn in FY22E. We expect its live streaming/ ads/ e-commerce rev to grow at 7%/66%/71% CAGR in FY20-23E, accounting for 32%/56%/11% of total revenue in FY22E.
- Initiate with BUY. We set our DCF-based TP at HK$382 (implying 12x/9x FY22/23E P/S, or 48x FY23E P/E), higher than industry average. Suggest to buy on dips, as stock price pulled back by 25% recently for market volatility. Further catalysts: 1) upcoming earning results; 2) strong user metrics; 3) potential stock connect; 4) monetization outperformance; and 5) new initiatives contribution.
