Kling's Spectacular Rise Can’t Cure Kuaishou's Growth Woes

$KUAISHOU-W(01024.HK) The first quarter report was released after the Hong Kong stock market closed on May 27, Beijing time. The performance for the period was basically within expectations, but short-term changes in some indicators indirectly confirmed some long-term issues of the company and short-term adjustments in its business strategy. Let's take a look:

1. User growth stagnation, stickiness maintained: The monthly active users in the first quarter were 712 million, with a slight increase in churn compared to previous years. Looking at the promotion expenses, the growth rate has slowed down. Therefore, it can be concluded that Kuaishou's pure organic traffic no longer has much advantage. The daily active users indicator that the company focuses on was 408 million in the first quarter, and the user stickiness (DAU/MAU) remained stable.

2. E-commerce ensures stable GMV growth: E-commerce competition never stops, and this year is also quite stressful. After the bottleneck of live-streaming e-commerce, Kuaishou's growth rate has fallen to a new range. The company's goal for this year is to sacrifice some commission rates to ensure stable GMV growth. GMV grew by 15% in the first quarter, with a take rate of 1.4%, slightly down year-on-year.

3. Advertising under high base pressure: In addition to e-commerce, the incremental growth of Kuaishou's external circulation advertising in the past year mainly came from the investment in games, short dramas, and online literature industries. Last year's first quarter saw fierce competition in the business wars of Eggy and Yuanmeng, and short dramas were also at their peak, resulting in a high base, making the first quarter growth rate only 8%. It is expected that in the second quarter, with the base decreasing and the e-commerce festival driving, the growth rate will return to around 15%.

4. Keling's revenue exceeds expectations: The first quarter revenue was 150 million, basically exceeding the annual revenue target of 450 million. The release of Keling 2.0 in April received good feedback. In May, Google's Veo 3 led in some text-to-video technology, and the dimensionality reduction attack by giants is a risk point for all vertical platforms. You can pay attention to the management's statements.

5. Live streaming health recovery: The first quarter officially resumed growth, with a growth rate of 14%, slightly exceeding expectations. Over the past year, during the rectification period, Kuaishou continued to expand the scale of guilds and signed more high-quality streamers, especially focusing on expanding the game live streaming field.

6. Cost reduction and efficiency improvement paused: The increase in live streaming costs and the confirmation of AI computing power costs in the first quarter led to a slight decline in gross profit margin year-on-year. Marketing expenses were optimized, resulting in a year-on-year decrease. Currently, promotional expenses are mainly used during the second and fourth shopping seasons, including promotional activities and cash coupons. The increase in management and R&D expenses may be related to the expansion of new businesses (local life, overseas, AI, etc.) and the addition of teams.

7. Shareholder buyback pace unchanged: In the first quarter, the market value continued to rise due to the Deepseek trend, and Kuaishou further slowed down the buyback efforts, spending less than 1.2 billion Hong Kong dollars in total, repurchasing 24 million shares of company stock.

The buyback plan proposed at the beginning of last year for 36 months and 16 billion Hong Kong dollars has used 7.3 billion as of May, with a progress of 46%, basically arranged to be completed according to the three-year expiration. Therefore, based on an average annual buyback strength of 5.5 billion Hong Kong dollars, the current shareholder return is estimated to be 2.6%, with a low yield.

8. Detailed financial report data overview

Dolphin Research's view

The first quarter still reflects the Kuaishou on the