HSBC Global Research says it has a more positive outlook on advertising revenue for KUAISHOU-W (01024.HK)  +0.400 (+0.701%)    Short selling $717.73M; Ratio 25.928%   , which is expected to rise 21% YoY, benefiting from upgraded advertising products to attract more SME advertisements. Still, the broker said this won't be able to offset a worsening decline in live-streaming revenue.

The broker said improved revenue quality could boost margins, with a shift in revenue mix toward advertising and e-commerce, further optimisation of traffic acquisition and maintenance, broadening of cost and revenue sharing ratios, and the introduction of AI in content and advertising materials capable of contributing to better margins.

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HSBC lowered its revenue forecasts on KUAISHOU for this year and next year by 1% to 2%, but raised its net profit forecasts by 12% and 26%. The broker kept its Buy rating but trimmed its target price to $72 from $78, citing a lower long-term revenue growth forecast.

The broker believed that KUAISHOU shares are underperforming on the back of consistently better-than-expected results, perhaps because investors are lowering their risk, advertising and e-commerce market share growth is lagging behind that of Douyin, and the P/E ratio set by the buyback of the ByteDance is lower than that of KUAISHOU. However, these issues do not change the fact that KUAISHOU is the only listed short video platform, and its P/E ratio of only 13x projected for 2024 is attractive compared to the two-year earnings CAGR of 40%, the broker remarked.

(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-05-14 16:25.)

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