Kuaishou Investors Cheer Profit News And Buyback Plan (KUASF)

by Jacob Solomon Jun 1, 2023 News
Kuaishou Investors Cheer Profit News And Buyback Plan (KUASF)

Thanakorn Lappattaranan is a stock photo.

Two years after a blockbuster IPO, the Chinese short-video platform Kuaishou Technology is finally enjoying its first taste of profitability.

The company announced last Monday that its first-quarter revenue jumped 19.7% to 25.2 billion dollars from the year- earlier period. Kuaishou's net loss narrowed as a result.

Changes in fair value, equity incentive expenses and asset impairments were not included in the results.

The company made its first profit after going public on the Hong Kong Stock Exchange.

The business indicators that improved in the quarter were subscriber numbers, core business and overseas revenue. It pushed the business into profit territory.

On the same day as the earnings release, the short-video platform served up more welcome news for shareholders, with a plan to buy back up to HK$4 billion ($510 million) of its stock. The market welcomed the double dose of positive news and the share price rose 3%.

After the lifting of Covid controls, revenue from Kuaishou's core businesses of online marketing services, live-streaming and e- commerce increased.

The revenue fell due to a high base effect from an annual live-streaming event, but the turnover rose compared with the same period a year earlier.

A recovery in the advertising business, as well as growing merchandise e- commerce transactions, helped push revenue from the three core businesses up by between 15% and 51% year-on-year.

E-commerce booster

The majority of Kuaishou's money has been made by livestreaming and ad-based marketing. livestreaming has lower margins due to the fact that income has to be split with the hosts and the business incurs more tax expenses. Online marketing services can be consolidated by streaming.

In order to boost income, Kuaishou has ventured further into the more profitable arena of e- commerce, building revenues on the back of the accumulated user data that acts as a driving force for its business.

The company burned its quarterly results by putting in a better performance abroad. Strong growth in livestreaming payments in Brazil and Indonesia helped to shrink operating losses in overseas markets. The fall in operating profit in mainland China was due to seasonal factors.

Cheng Yixiao was confident that the advertising and marketing industry would recover in the second half of the year.

He said that the e-commerce business would benefit from improved infrastructure for merchants, short-video content, branded e- commerce and different merchandise categories. He said that Kuaishou will invest in systems that allow merchants to improve conversion rates.

The first quarter results show that the company has made progress. The average daily active users increased by 8 million to 372 million and the average monthly active users increased by 14 million to 622 million.

Slashing sales costs

Management and technology tools, as well as the automated deployment of high-quality short dramas, video and live content, helped to drive up user numbers.

Average daily active users spend more than 120 minutes a day on Kuaishou platforms, and total views of short videos and live content have risen more than 10%.

The total e- commerce gross merchandise volume has grown faster than the user rate, reflecting an increase in user spending

Kuaishou has made it easier for users to look for content. A peak of more than 650 million daily searches was seen on the platform in the first quarter.

The company was able to monetize the search capabilities. During the quarter, the GMV of search-generated e- commerce doubled, compared with the first three months of the year.

Kuaishou is trying to boost income by controlling spending on user acquisition and retention The selling and marketing expenses fell in the first quarter.

Spending on R&D staff benefits fell as a result of an efficiency drive and staff layoffs.

Kuaishou has a forward P/E ratio that is much bigger than Hello Group and JOYY Inc.

Some analysts think the gap is closing. In the second quarter, the investment bank expects Kuaishou to have an adjusted profit of 1.25 billion yuan, which is higher than the previous forecast of 1.10 billion.

Kuaishou would be closer to the level of its peers if that happened. The price target for Kuaishou has been raised from HK$105 to HK$108 by Jeffries.

There is no disclosure.

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