Daily Brief TMT/Internet: Kuaishou Technology, Tencent, Z Holdings and more

In today’s briefing:

Kuaishou (1024 HK): Why Did the Market React Mutedly to Its Strong Profit Alert?
ECM Weekly (6th August 2023) – Concord Biotech, SBFC Fin, Fadu, Mitsui Fudosan, Capitaland Ascott
[Z Holdings (4689 JP, SELL, TP JPY 340) Target Price Change]: Continued Impact of Chinese E-Commerce

Kuaishou (1024 HK): Why Did the Market React Mutedly to Its Strong Profit Alert?

We believe that Kuaishou’s outsized bottom-line beat for 1H23 was driven by stronger advertising and e-commerce business and cost reduction than the street expected.
However, the market’s muted response suggests that investors are looking beyond 1H23 or even FY23 to price in a mature growth outlook.
Kuaishou is trading at ~40x our FY23 estimate against 24% earnings CAGR from 2023 to 2025 which represents a hefty valuation premium over other China tech giants.

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, Concord Biotech Ltd (658823Z IN) and SBFC Finance Limited (1547353D IN) opened their respective IPO bookbuilds this week.
On the Placements front, India began picking up steam post-earnings seasons.

ZHD reported F1Q/C2Q23 top-line, non-GAAP operating profit and non-GAAP net profit in-line, in-line and (32%) vs. consensus, respectively. Earnings miss was driven by wider tax expense.
ZHD’s B2C e-commerce platform GMV continued to decline, which we suspect is due to the continued impact of STAT, especially Shein.
We maintain SELL and raise TP to JPY 340 due to improved ads-spending, but we expect the transient ad spend increase to be offset by loss of ecommerce customers.

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