Live-streaming e-commerce growth by increased penetration. While China online retail growth has slowed amid soft consumption and tightening regulation, we expect live-streaming e-commerce (“LS e-commerce”) to post a 70% 2020-23E CAGR to Rmb4.7 tn, as penetration increases to 27% (2020: 8%). With regulations in place to crack down on non-compliant behaviour, such as fake transaction data and false advertising, a healthy environment would be developed, supporting sustainable growth of the industry.

 And widen consumption scenarios. LS e-commerce reshapes the market in terms of creating demand (customers’ discretionary demand attracted by KOLs) and supply (new channels for merchants) while also offering more opportunities to emerging brands.

 But not all players benefit the same. Taobao Live (2023E market share: 33%): Well integrated into the current ecosystem with a strong supply chain; Douyin (40%): the fastest growing platform to take market share from other players as high-quality content brings in substantial traffic for brands. Industry participants see strong monetisation potential with a take rate exceeding Taobao/Tmall; Kuaishou (20%): Private domain underpinned by users’ trust in KoLs. LS-based platforms – Douyin & Kuaishou – are expected to gain 10% market share in e-commerce in 2023E from nil in 2019, which could pressure existing players’ take rates and margins in the long term, in our view. We project Taobao/Tmall’s take rates and adj. EBITA margins to gradually decline and stabilise at c.3.9%/55-60%. Pecking order: Top picks PDD (OP, TP: US$215) with upside in monetisation and CGP. JD (OP, TP: US$96) offers earnings visibility and less regulatory risk. Kuaishou (Initiate with OP, TP: HK$135) has a favourable risk reward with monetisation upside; Alibaba (OP, TP: US$225) continues to face competition despite its well-established infrastructure.