Research published by Blue Lotus Research on March 22, 2022

(5 Pages, 4 graphs and tables)
Listen to analyst’s audio summary
  • Our running case for Kanzhun (BZ) is that Beijing and Shanghai will not be locked down simultaneously;
  • COVID lockdown has impacted BZ’s business in Shanghai materially. However, the impact has been overblown given the share price correction taking place;
  • We cut the TP by US$2 to US$29 and upgrade the stock to BUY
COVID lockdown has hit on BZ’s Shanghai business hard
Based on our channel check, full year KPI has been adjusted materially downward for BZ’s Shanghai business. If the adjustment were to made nationally, BZ’s full year growth target in top and bottom line must be adjusted down dramatically.
We are taking a stand on lockdown policy outlooks
However, Shanghai’s Omicron cases outside the lockdown areas have been continuing to trend down. According to Dr. Zhang Wenhong, a local expert, effective reproduction number (Rt) has been brought down from 10 to 1.  This leads us to believe Shanghai will likely exit lockdown at a time when Beijing is about to enter one.
Pandemic might impact business’s willingness to pay
Currently we do not have a good way to track BZ’s ASP. MAU reflects the activism of both job seekers and recruiters and has been stable up till March (April 18, ). We cut BZ’s C1Q22 top line by 6.6% but keep C2022 top line unchanged. We cut C1Q22 non-GAAP operating profit by 6.6% and C2022 by 2.6%.
But Chinese economy is not that easy to dislodge
While China’s economy is likely to take a deep hit in C2Q22 due to Omicron lockdowns, we believe the long-term impact has been overblown. Employment has been a relatively sticky factor of the economy and we thus expect the impact to be further muted. We believe it is a good time to buy BZ.

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