Wei Xiong

Wei Xiong from UBS asked how Kanzhun Limited plans to sustain its above-peer growth and continue gaining market share, especially if the macro situation improves and competition intensifies. She also questioned the outlook for profit margins next year, identifying major investment areas like sales and marketing, and whether the company will prioritize profitability or lean towards investing for growth.

Answer

Jonathan Peng Zhao, Founder, Chairman, and CEO of Kanzhun Limited, stated that the majority of their 6.8 million paid enterprise customers are small and micro enterprises, many of whom were developed by Kanzhun rather than gained from peers, indicating ample room for growth within China's 40 million SMEs. He emphasized that the current strong margin profile is a strategic choice reflecting effective double-sided network effects and efficient internal management, predicting continued margin improvement next year. He clarified that the company prioritizes user growth (targeting 35 million newly verified users next year) and revenue growth over profitability.

Wei Xiong from UBS asked about Kanzhun's ability to continue gaining market share in enterprise recruiting budget allocation, how to sustain above-peer growth, and potential competitive pressures if the macro situation improves. She also inquired about the margin trend for next year, major investment areas like sales and marketing spending, and whether the company will continue prioritizing profitability or shift towards investing for growth.

Answer

Jonathan Peng Zhao, Founder, Chairman, and CEO of Kanzhun Limited, stated that the 13.3% growth in paid enterprise customers (6.8 million), primarily small and micro enterprises, was largely self-generated, indicating ample room for market share growth given China's 40 million+ SMEs. He noted that Kanzhun's advantages in ROI and service availability help in competitive landscapes. Zhao explained that the current strong profit margin is a strategic outcome of prioritizing profit amidst uncertainty, reflecting effective double-sided network effects and efficient operations. He predicted continued margin improvement next year, emphasizing that user service and revenue growth (targeting 35 million newly verified users) will take higher priority than profitability, without sacrificing growth.

Wei Xiong from UBS Group AG asked about the outlook for profit margins from their current high levels, the company's primary investment areas, and the competitive impact of increased advertising by peers.

Answer

CFO Yu Zhang attributed the strong, improving margins to the business model's scale effects and cost controls, expecting a gradual upward trend to continue. He identified R&D, innovation, and shareholder returns as key uses of cash. Wenbei Wang, Head of Investor Relations, added that competitor advertising has had a limited impact due to Kanzhun's strong brand, high user retention, and efficient user acquisition.

Wei Xiong asked about potential changes to the competitive landscape from AI adoption, plans to expand services with AI, and requested updates on the blue-collar recruiting business, including key KPIs and progress in new areas like placement services.

Answer

CEO Peng Zhao assessed that the current generation of AI has not yet caused disruptive changes to the competitive landscape, which remains stable. He highlighted the company's significant AI investment, including over RMB 1 billion in chips, to build capabilities. Zhao noted that AI increases certainty in developing closed-loop placement services, a key focus area. For the blue-collar segment, which now exceeds 45% of new users, the strategy is to simplify products, with AI expected to enhance the efficiency and reliability of placement services.

Wei Xiong from UBS inquired about the company's current customer acquisition costs and how they compare to previous years. She also asked about major marketing plans for 2025, the long-term sustainable margin level, the performance of the blue-collar business, specifically the 'Conch program,' and the strategic focus for new initiatives this year.

Answer

CFO Phil Yu Zhang addressed the financial questions, stating no major marketing campaigns are planned for 2025 as user acquisition is more efficient due to brand awareness. He projected continued margin improvement, setting a non-GAAP operating profit target of RMB 3 billion for 2025, a 30% increase from 2024. Founder, Chairman and CEO Peng Zhao then discussed the blue-collar business, revealing the 'Conch program' generated over RMB 200 million in contract value, contributing more than 2% to total revenue. He added that AI could further enhance this service by empowering less experienced agents.

Wei Xiong asked about the future growth strategy for the blue-collar recruitment business, including potential offline service capabilities and the competitive landscape. She also inquired about the profitability outlook for next year, its key drivers, and any potential new investments.

Answer

CEO Peng Zhao explained the blue-collar strategy focuses on building a trusted ecosystem for factories, agents, and workers, emphasizing long-term value over short-term gains from inflated job postings. He confirmed no plans for heavy investment in offline placement. On profitability, Mr. Zhao expressed strong confidence, citing significant operating leverage. CFO Yu Zhang added that margins will improve in 2025, driven by a stable gross margin, improved sales efficiency, controlled marketing and R&D spend, and a disciplined approach to new business investment.

Wei Xiong requested more details on Trip.com Group's international performance and any regional operational highlights, noting strong growth in Q3.

Answer

Jane Sun, Chief Executive Officer, reported that Trip.com bookings increased by around 60% year-over-year in Q3, with Asia-Pacific growing over 50% and remaining a key operational focus. She highlighted strengthening brand recognition through localized products and marketing, being named the best online travel agency in Asia, and a 100% year-over-year surge in inbound bookings, signaling strong investments in international expansion.

Wei Xiong from UBS requested more details on Trip.com Group's international performance and regional operational highlights.

Answer

CEO Jane Sun reported a 60% year-over-year increase in Trip.com bookings in Q3, with Asia-Pacific growing over 50% and remaining a key operational focus and contributor. She noted strengthened brand recognition through localized products and marketing, with Trip.com recognized as the best online travel agency in Asia. Emerging markets like the Middle East and Europe also showed encouraging momentum. Inbound bookings surged over 100% year-over-year in Q3, driven by innovative offerings, and strong international investments are planned.

Wei Xiong from UBS Group AG asked for an assessment of the current competitive landscape, noting JD's entry into the market and other strategic moves by OTAs, and the anticipated impact on the business.

Answer

CFO Cindy Wang reiterated that Trip.com's strategy is to focus on its core strengths: excellent service and comprehensive product offerings. She stated the company does not support pure price competition, as it doesn't serve customers well in the long run. This focus on quality has been their successful strategy for 25 years and will continue to be their focus for winning customer loyalty.

Wei Xiong from UBS followed up on the international business, asking where marketing resources are being allocated, which strategies are proving effective, and what the plan is for the rest of the year.

Answer

CEO Jane Sun explained that marketing efforts are intensifying in Asia, where the company's products and services are highly competitive. She stated that direct app user acquisition is the most effective channel for long-term growth, with mobile apps accounting for 70% of international orders in Q1. Sun affirmed that campaigns are delivering desired outcomes and that the focus remains on ROI.

Wei Xiong from UBS inquired about the outlook for outbound flight capacity recovery, the impact of recent incidents in Thailand and FX changes on demand, and the strategy for maintaining outperformance in outbound travel.

Answer

CFO Xiaofan Wang stated that outbound flight capacity reached over 80% of 2019 levels in Q4 and is expected to exceed 90% by 2025. She noted that despite headwinds in some destinations, total outbound bookings grew 20-30% during Chinese New Year, with travelers switching destinations. No significant impact from FX was observed. Outperformance is driven by enhancing product offerings, service quality, and investment in the Trip.com platform.

Wei Xiong from UBS Group asked about Baidu's plans for cost optimization and efficiency improvements to protect margins, given the near-term headwinds on advertising revenue and continued investment in AI.

Answer

CFO Haijian He acknowledged the significant near-term margin pressure from AI search investments. He outlined plans to enhance internal efficiency through better resource coordination and utilization. While remaining committed to AI, the company will manage the investment pace prudently to support a gradual recovery in profitability over time.

Wei Xiong of UBS Group AG asked about the enlarged Total Addressable Market (TAM) for China's cloud market due to AI, Baidu's competitive differentiation, and updates on the Qianfan platform, including which industries are showing the fastest adoption.

Answer

EVP Dou Shen stated that the cloud TAM is expanding significantly as foundation models drive demand for computing power and full-stack platforms. Baidu differentiates itself through its end-to-end AI capabilities, efficient infrastructure, and its advanced Qianfan MaaS platform, which offers a comprehensive library of proprietary and third-party models. Shen noted that early adopters include internet, tech, and education companies, with growing interest from automotive, financial services, and the public sector.

Wei Xiong from UBS followed up on the cloud business, asking about the enlarged total addressable market (TAM) in China due to AI, Baidu's competitive differentiation, and updates on the Qianfan platform, including key industries for adoption and long-term potential.

Answer

Dou Shen, EVP of Baidu AI Cloud Group, confirmed the cloud TAM is expanding meaningfully. He stated Baidu's differentiation lies in its end-to-end, full-stack AI capabilities, efficient infrastructure, and the advanced Qianfan MaaS platform. The company's application-driven strategy focuses on delivering tailored solutions, which has strengthened its client pipeline. Shen identified internet, tech, and education as early adopters, with automotive, financial services, and the public sector also showing strong interest.

Wei Xiong from UBS asked for an update on Baidu's capital return plan for shareholders, with a focus on share buybacks and potential dividends.

Answer

Interim CFO Junjie He confirmed Baidu's firm commitment to its share buyback program, noting a steady pace of repurchases averaging about $1 billion annually, which has led to a decline in total shares outstanding. While the company is currently focused on its sustainable buyback program, He mentioned that management remains open to evaluating various options for returning value to shareholders. He stressed that the ultimate goal is to build a solid business foundation by capitalizing on the AI transformation.

Wei Xiong of UBS Group AG inquired about the trend in product return rates and the gap between GMV and revenue, especially with the growth of SVIP users. Additionally, she asked for an update on the performance and strategic outlook for the Shenzhen outlet business.

Answer

Jessie Zheng, Head of Investor Relations, explained that the return rate remains relatively stable, with a potential 2-3 percentage point annual increase from SVIP growth that is expected to smooth out over time. Regarding the outlet business, Zheng reported strong momentum with double-digit same-store growth and confirmed that Vipshop intends to continue expanding the outlets as a long-term strategic asset.

Wei Xiong of UBS questioned the strategy for driving further growth in the Super VIP (SVIP) member program and asked for an update on the competitive landscape in e-commerce amid macro uncertainty.

Answer

CEO Eric Shen (interpreted by Jessie Fan) expressed confidence in achieving double-digit SVIP customer growth for the full year 2025, driven by exclusive off-price merchandise and private sales. On competition, he emphasized that Vipshop's strategy is to remain anchored to its value proposition as a discount retailer for brands, focusing on merchandise, price, and service to become the go-to 'online outlet' for consumers.

Wei Xiong of UBS inquired about the gross margin trend for 2025 and whether there was room for improvement from the strong 2024 results. She also asked about the 2025 net profit margin outlook and the company's view on a sustainable long-term net margin level.

Answer

CEO Eric Shen explained that the 2024 gross margin of 23.5% was a very good level, and the company might prudently invest a portion of it to incentivize brand partners rather than strictly maintaining it. For net profit margin, he expressed confidence in achieving a flattish level compared to the past two years, with potential for improvement if the company achieves better scale and operating leverage. He affirmed the company has a good command of its margin profile.

Wei Xiong of UBS Group AG requested more details on the new ad-based membership, asking about its contribution to revenue and subscribers and the strategy to scale it without cannibalizing standard subscriptions.

Answer

Management clarified that the recent strong advertising growth was driven by incentivized ads, not the new ad-based membership. The ad-based model, piloted two months ago, is still in its infancy. The strategy is to create a three-tier membership system (Ad-based, Standard, SVIP) to provide differentiated solutions and broaden the overall subscriber base. They see it as a strategic operational direction but noted it is not yet a significant contributor.

Wei Xiong of UBS Group AG requested more details on the new ad-based membership, including its contribution to revenue and subscribers, and the strategy to scale it without cannibalizing standard subscriptions.

Answer

Management's moderator clarified that recent strong advertising growth came from broad incentivized ads, not the new ad-based membership, which is still in a pilot phase. They view this new tier as part of a future three-tiered system (ad-based, standard, SVIP) designed to broaden the overall subscriber base by offering differentiated solutions. Its current contribution is minimal as it is still in an early stage.

Wei Xiong from UBS asked about the drivers of gross margin expansion, its future potential, and the outlook for operating expenses and net margin trends for the year.

Answer

An executive attributed the margin improvement primarily to strong revenue growth from subscriptions (especially SVIP) and advertising, combined with disciplined cost management. They stated that gross margin still has room to grow. For 2025, sales expenses are expected to grow slower than revenue and management expenses will remain flat, leading to an anticipated improvement in net profit and net margin.

Wei Xiong from UBS questioned Tencent Music's AI strategy for 2025, asking about planned product launches to improve user experience and the financial implications, such as revenue or margin benefits versus increased investment costs.

Answer

CEO Liang Zhu explained that TME's strategy is to leverage partner large language models, like Tencent's DeepSeek, rather than building its own. He highlighted current integrations like AI assistants, AI song covers, and AI-enhanced sound quality. He stated that while there are computing costs, the overall investment is controllable, and the company will continue to invest in R&D and manpower for promising new AI applications.

Wei Xiong from UBS noted that the social entertainment business performed better than expected with a narrowing revenue decline and asked for the reasons behind this and the outlook for the segment.

Answer

An executive attributed the outperformance to two factors: strong results from non-live streaming services like advertising and VIP subscriptions on one platform, and successful implementation of innovative, interactive game-like features on Kugou Live. Management expects the social entertainment business to maintain stable growth going forward as they solidify the platform's foundation.

Asked about JDDJ's strategic focus for 2024, specifically regarding the balance between user growth metrics and efficiency/profitability improvements.

Answer

The company aims to balance growth and profitability for JDDJ in 2024. The strategy involves pursuing high-quality user growth and frequency while simultaneously adopting a strict, ROI-driven approach to improve operating efficiency and achieve sustainable profitability. The overall goal is healthy growth combined with steady improvement in profitability.