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China’s thriving live-streaming sector, an extension of its robust e-commerce industry, is evolving as a significant avenue for brands to engage with consumers while shopping. An iResearch report suggests that live-streaming accounts for 11.7% of total e-commerce sales in the country. McKinsey & Company predicts this figure to grow up to 20% by 2026.
Live-streaming or live-commerce not only boosts conversion but also helps brands to enhance their appeal and position themselves distinctly. However, the approach of live-streaming has evolved over the years. Instead of focusing on deep discounts and bulk shopping, it is more about story-telling and consumer engagement.
With 660 million viewers in 2022, China’s live-streaming business is projected to grow to $720 bn by the end of 2023, as per iResearch. The pandemic intensified growth in China’s live-streaming sector, where apparels and fashion constitute a 36% share.
McKinsey & Company further explains, “China is the most mature of all live-commerce markets. We found that 57% of live-commerce users in the country have used the shopping format for more than three years, compared with just 5 to 7% of live-commerce users in Europe, Latin America, and the United States.”
The dominant audience for Chinese live-streaming sites is primarily Gen-Z and millennials, whose purchasing power is rising rapidly. As the shopping interactions of the host get more personal with the audience, there are higher chances of impulse shopping. While top brands want to capture this and make the most of this trend, the regulators think otherwise.
In the recent past, regulators have cracked down on China’s live-streaming apps to limit the time spent by younger people on shopping and restrict the practice of virtual tipping to the hosts.
The Chinese regulators also aim at tight censorship over the content that young shoppers consume and reduce the influence of e-commerce companies. Regulatory scrutiny from China, as well as the US, has been a major headwind for China’s live-streaming stocks.
How to invest in China’s live-streaming companies?
Notwithstanding the risks of regulatory uncertainty, Chinese live-streaming companies offer plenty of growth prospects. With a steadily expanding viewership base and the rising influencer marketing trend, live-streaming is here to stay. Investors can consider these three technology stocks to capitalise on the growth prospects of China’s live-streaming sector.
Kuaishou Technology
Kuaishou Technology facilitates short video sharing and live-streams through AI technology and Big Data. The company also offers online marketing services, e-commerce, and online games. Kuaishou stocks surged 160% on its debut on the Hong Kong stock exchange in February 2021.
For the fiscal year ended 31 December 2022, Kuaishou Technology witnessed a 16.2% rise in its revenues, reaching 94.2 bn yuan ($12.9 bn) compared to the previous year. Live-streaming revenue jumped 13.7% to 10.03 bn yuan ($1.38 bn) between October to December 2022, led by diversified content, optimised live-streaming ecosystem, and cutting-edge algorithms. The company’s operating loss narrowed to 11.1 bn yuan ($1.52 bn) from 27.48 bn yuan ($3.76 bn) in the previous year.
Traded on the Hong Kong stock exchange (HK:1024), the firm holds a market capitalisation of 280.48 bn HKD. Over the last year, the company’s stock has climbed 2.7%. Its PE ratio stands at 3.59, and it maintains a price-to-book ratio of 6.85.
DouYu International Holdings Limited
DouYu International Holdings is a Wuhan-headquartered live-streaming platform. It is a leading player in the eSports value chain. Through its app and web portal, it offers access to immersive and interactive games. Its two major segments are live-streaming and advertisement. Tencent holds nearly a 37% share of Douyu International.
For the year ended 31 December 2022, DouYu witnessed a decline of 22.4% in its revenues, reaching 7108.23 mn yuan ($973.10 mn) compared to the previous year. The company’s operating loss considerably narrowed to 198.8 mn yuan ($27.22 mn) from 649 mn yuan ($88.85 mn) in the previous year.
Traded on the US Nasdaq (NASDAQ: DOYU), the firm holds a market capitalisation of $326.17 mn. Over the last year, the company’s stock has fallen 17.46%. Its PE ratio stands at 38.04, and it maintains a price-to-book ratio of 1.82.
HUYA Inc.
HUYA Inc. is a game live-streaming platform and an e-sports event organiser. The Company also operates an interactive online community that offers a range of functions such as bullet chatting, real-time commenting, and gifting.
The company’s revenue declined by 18.8% year-on-year to 9.2 bn yuan ($1.2 bn) in the fiscal year ending December 2022. During the same period, the company’s operating loss widened to 706.45 mn yuan ($96.71 mn) as compared to a loss of 30.2 mn yuan ($4.13 mn).
Huya Inc stocks are listed on the NYSE (NYSE: HUYA). The company has a market capitalisation of $609.35 mn. Since last year, the company’s shares have fallen by 27.84%. Along with that, the shares have a PE ratio of 13.55 and a price-to-book ratio of 2.49.
Editor’s note: All stock movement figures as of August 17, 2023.
