Double Eleven is coming! Why do we have high expectations for Kuaishou?

According to the Zhongtong Finance APP, the "Double Eleven" promotion is approaching, and major platforms have started their preheating activities. Among them, Kuaishou (01024) is the first platform to fully launch the Double Eleven pre-sale promotion. They have proposed the theme of "Billions of subsidies from top brands, available on Kuaishou Mall". The "Kuaishou Mall" tab page has recently been launched on the APP.

According to Kuaishou, the Kuaishou E-commerce Double Eleven Shopping Carnival officially started on October 18th and includes three stages: pre-sale, final payment, and official sales. During the official sales period starting on October 31st, the platform will release the largest discounts of the year, truly allowing users to experience "a good life doesn't have to be expensive".

With the arrival of the e-commerce peak season, Kuaishou's performance in the third quarter has become a hot topic in the market. Institutions generally believe that the company's e-commerce business performed strongly during the off-season, while also driving overall advertising revenue growth against the trend.

In its forward-looking research report, CICC stated that although the third quarter is traditionally the off-season for e-commerce, due to the continuous optimization of Kuaishou's product supply, the bank predicts that the number of orders on the platform will continue to increase compared to the previous quarter, and expects Q3 e-commerce GMV to grow by 30% YoY. With the strong growth of the e-commerce business, merchants have a good willingness to invest in advertising within the platform, and internal circulation advertising revenue is expected to continue to rise. In addition, during the peak season of summer traffic, brand advertisers for short dramas and mini-games have a higher willingness to acquire traffic. Combined with Kuaishou's strengthened construction of native ads and value audience recognition, the bank predicts that the company's Q3 advertising revenue will increase by 28.2% YoY to 14.9 billion yuan.

In terms of overall revenue, GF Securities predicts that Kuaishou's Q3 revenue is expected to increase by 20% YoY to 27.7 billion yuan, with a continued improvement in profit margin, and a net profit of 2.7 billion yuan after adjustments, surpassing Bloomberg's consensus expectations.

Institutional analysis points out that Kuaishou's traffic foundation is stable, and differentiated content enhances user stickiness. During the summer, the company amplified its advantages during the peak traffic season through special content operation activities. For example, during the summer season, Kuaishou released more than 80 high-quality Star Mango short dramas, 21 of which achieved over 100 million views. CICC predicts that Kuaishou's DAU in the third quarter will continue to grow to 384 million, while GF Securities believes that with the enrichment of content supply and algorithm improvement, the Q3 average user time spent on the platform will recover to a higher level than Q1.

Regarding the market's short-term concerns about the impact of the external environment on the company's core business growth, CICC's analysis believes that Kuaishou benefits from its competitive advantages and is expected to maintain a relatively good growth rate in the industry even in a weak market environment. In addition, the certainty of profit release is increasing quarter by quarter, providing strong support for the stock price. The bank has given a target price of HKD 82 for the company, representing an upside potential of 46.3% compared to the current stock price.