On Tuesday, Morgan Stanley maintained its Overweight rating on Kanzhun Ltd. (NASDAQ: BZ) with a steady stock price target of $23.00. The firm highlighted Kanzhun's robust year-over-year revenue increase of 46% to Rmb1.58 billion, surpassing the Bloomberg consensus by 3%. The company's cash billings also saw a 9% quarter-over-quarter rise, which was higher than the anticipated 3-5% range.
Kanzhun has experienced a rebound in the job market supply/demand ratio and in the demand for key account (KA)/white-collar recruitment since the third quarter of 2023. The fourth quarter of 2023 saw paid enterprise users reach a record 5.2 million, and the total newly registered users in 2023 hit 49 million.
Due to operating leverage, the non-GAAP operating profit was Rmb520 million, which is 14% higher than Morgan Stanley's estimate, resulting in a non-GAAP operating margin of 32.9%. This represents a significant improvement from the negative 8.9% or approximately 20% when excluding World Cup investment in the fourth quarter of 2022.
Kanzhun's non-GAAP net profit reached Rmb629 million, 22% above the Bloomberg consensus, indicating a non-GAAP net margin of 39.8%, a substantial increase from 5.5% in the fourth quarter of 2022. Following the conclusion of its $150 million share buyback program, which was effective from March 2023 to March 2024, Kanzhun announced a new buyback initiative of $200 million, set to run from March 2024 to March 2025.
The company's recruitment demand for KA/white-collar roles has been on a continuous upswing since the third quarter of 2023, while demand for small and medium-sized enterprise (SME)/blue-collar jobs has remained resilient. Morgan Stanley recognizes Kanzhun's dominant market position and innovative business model as key drivers for sustained long-term growth.
The firm projects that Kanzhun could lead revenue and earnings growth among Chinese internet stocks covered in their analysis from 2024 to 2027. Despite a relatively high valuation, Morgan Stanley believes that a premium is warranted due to Kanzhun's higher growth prospects and a more favorable competitive environment.
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