Company Reports

We maintain our fair value estimate for Boss Zhipin at USD 20 per ADR (HKD 78.20 per share) after the company reported first-quarter 2024 revenue of CNY 1.7 billion, which was 2% better than our estimate. Operating margin improved to 5% from negative 8% a year ago but saw a 900 basis point decline sequentially, which is a slight concern. Sales and marketing expenses increased to 34% of sales, and the company expects similar levels for the rest of 2024, which is 600-700 basis points higher than the second half of 2023. However, the elevated sales and marketing expenses are likely to be offset by a higher gross margin as the platform scales up, with more enterprises beginning to pay for its recruiting services. For the second quarter of 2024, the company guided revenue to the midpoint of CNY 1.935 billion, representing an increase of 30% year on year. This is also in line with our second-quarter 2024 forecast.

We expect Boss Zhipin to continue its growth in both monthly active users, or MAU, and paying enterprise customers in the near term, but there could be challenges in reaching its target. Kanzhun emphasizes that it has a differentiated algorithm and expects to reach 100 million MAU in the next three years—more than double its current users and almost 5 times that of its closest peer. However, we believe there are uncertainties over its long-term growth trajectory given peers’ performance history of usership stalling as they became more established in the market. We'd like to see greater user growth and customer monetization first before having a more certain outlook.

We are raising our fair value estimate for Boss Zhipin to USD 20 per ADR (HKD 78.20 per share) from USD 16 (HKD 62.60) after the company reported fourth-quarter 2023 revenue of CNY 1.58 billion, beating our estimate of CNY 1.53 billion by 3%. Sales and marketing expenses also declined by 7% year on year as a percentage of revenue, adjusting for one-time seasonality marketing costs from the World Cup. The company also provided first-quarter 2024 revenue guidance of CNY 1.67 billion, or 31% year-on-year growth, and expects a non-GAAP operating margin of 20%, an annual improvement of 1000 basis points. Boss Zhipin expects bookings to increase 12% sequentially in the first quarter to CNY 2 billion, representing a 21% year-on-year increase. Our new fair value estimate reflects upward revisions to our revenue growth and operating margin forecast in the near term. We believe near-term operating margin expansion is viable given the lower marketing costs and higher sequential booking growth in the first quarter, which tends to have the least hiring activity due to the Lunar New Year. The number of users increased 33% year on year to 41.2 million in the fourth quarter, while total paying enterprises increased 44% to 5.2 million. Boss Zhipin also announced a USD 200 million share buyback plan that signals confidence in its outlook. We view Boss Zhipin as fairly valued now.

We maintain our fair value estimate of $16 for Boss Zhipin as third-quarter 2023 revenue of CNY 1.61 billion exceeded the top end of its guidance by 3%, driven by user growth and engagement. Users grew by 38% year on year to 44.6 million in the quarter. We believe that Boss Zhipin should reach its goal of 100 million subscribers in 2026 but still see slight execution risks given the low barriers to entry in the online recruiting industry. We are cautious given the nascent nature of the company and that other historic peers plateaued in their growth as more job platforms entered the market, but we remain encouraged by Boss Zhipin’s margin expansion progress.

We initiate coverage on Kanzhun with a fair value estimate of USD 16 (HKD 62.60), which reflects its current leadership position in the industry based on the number of monthly active users, or MAU, but also a lack of differentiation and potential vulnerability to switching costs relative to its competitors. We think that Kanzhun, whose product is the recruiting platform Boss Zhipin, is trying to create a brand for itself from its expensive advertising and recruitment events that could set it apart from competitors. The company has 43.6 million MAU, which is the most among its peers in the online recruitment industry. We also expect robust revenue growth at 25%-30% per year in the near term through differentiated targeting of small and medium-size enterprises, or SMEs, in addition to large key accounts. The company can provide value to SMEs, whose time and resources may be limited, through its algorithm-based screening and hiring services. The company is spending resources to target smaller companies that are overlooked in their demand for labor, which currently sets it apart from its peers and could also generate greater brand awareness.

We expect Boss Zhipin to continue its growth in both monthly active users, or MAU, and paying enterprise customers in the near term, but there could be challenges in reaching its target. Kanzhun emphasizes that it has a differentiated algorithm and expects to reach 100 million MAU in the next three years—more than double its current users and almost 5 times that of its closest peer. However, we believe there are uncertainties over its long-term growth trajectory given peers’ performance history of usership stalling as they became more established in the market. We'd like to see greater user growth and customer monetization first before having a more certain outlook.