Goldman Sachs has included KUAISHOU-W as its top stock pick for the month, with a target price of HKD 88.

Goldman Sachs recently released a research report, listing KUAISHOU-W (01024) as a "TOP PICK". Goldman Sachs has set a target price of HKD 88 for KUAISHOU-WR in the next 12 months. This means that KUAISHOU-WR's stock price has a potential increase of over 60%.

In terms of macro logic, Goldman Sachs analysts predict that the overall consumption growth rate will slow down to 7% in 2024. Among them, the main goods are expected to grow by 6% next year, while service consumption will be more resilient, with an expected growth rate of 9.2% next year. Chinese consumers in 2024 will be more inclined to rational spending, which means that consumption patterns are beginning to return to the core value of goods or services. Therefore, in terms of the main fundamentals and stock price driving factors in 2024, the Goldman Sachs analysis team emphasizes value consumption and global business expansion.

Goldman Sachs analysts believe that in the next two years, the driving force and sustainability of KUAISHOU-WR's revenue growth mainly come from three aspects: first, there is still room for expansion in the e-commerce category, especially for standard products including consumer electronics and home furnishings (accounting for about 16% of GMV in the third quarter), as merchants explore new GMV growth channels; second, although KUAISHOU-WR currently has over 110 million MPU, it still accounts for a relatively low proportion compared to its 650 million MAU. With the optimization of live-streaming e-commerce content recommendations and the progress of pan-category shelves, there is still room for improvement in the penetration rate of paid users, ARPU, and purchase frequency; third, the improvement of monetization efficiency. KUAISHOU-WR improves the monetization efficiency of e-commerce traffic through its "site-wide promotion" product.

At the same time, Goldman Sachs is optimistic about the future improvement of KUAISHOU-WR's profit margin. Goldman Sachs believes that the increase in KUAISHOU-WR's e-commerce monetization rate can reduce the proportion of the low-profit live-streaming business. In addition, KUAISHOU-WR achieves comprehensive cost control through measures such as improving customer acquisition and retention efficiency and optimizing bandwidth.

In terms of competition in the short video industry, Goldman Sachs analysts pointed out that KUAISHOU-WR is different from Douyin and Video Number in many aspects, attracting different user groups through differentiated content. Although the competition is still fierce, it is more about the short video industry seizing the overall duration and advertising share of the Internet.

Currently, KUAISHOU-WR's operating performance is growing in the direction predicted by Goldman Sachs. In the third quarter of 2023, KUAISHOU-WR achieved revenue of RMB 27.948 billion, a year-on-year increase of 20.8%. Among them, online marketing service revenue was RMB 14.69 billion, a year-on-year increase of 26.7%; live-streaming business revenue was RMB 9.719 billion, a year-on-year increase of 8.6%; other business revenue was RMB 3.539 billion, a year-on-year increase of 36.6%. In the third quarter, the company achieved a gross profit of RMB 14.453 billion, a year-on-year increase of 35.0%; the gross profit margin increased by 5.4 percentage points to 51.7% year-on-year; the adjusted net profit margin reached 11.4%.