DeepSeek User Kanzhun's Stock Up 10%+ On Solid Earnings

The employment app faces big opportunities, but also challenges, as more people enter the workforce and signs emerge that companies may be ramping up recruitment

Key Takeaways:

• Kanzhun's net profit jumped by 42.6% to 1.57 billion yuan last year
• The operator of the Boss Zhipin recruitment app saw its number of monthly active users grow by 25.3% last year to 53 million

A line from a popular TV drama says that "The choppier the water, the more expensive the fish that live there." The implication is that the tougher the environment, the greater the payoff if you can successfully see your way through it.

China's recruitment industry fits that bill, made choppy by significant growth in recent years that's the direct result of growing unemployment in an economic slowdown after three decades of breakneck growth. That landscape is providing plenty of job applicants for recruitment services, even if these companies will only truly thrive when the broader economy picks up and companies step up their hiring again.

The latest financial report from Kanzhun Ltd. (BZ.US; 2076.HK), operator of China's biggest online recruitment platform, Boss Zhipin, was sending signals that such an economic recovery might be just around the corner.

Kanzhun announced solid gains on both its top and bottom lines last year, with annual revenue up by 23.6% year-on-year to 7.36 billion yuan ($1.02 billion) and net profit up by an even greater 42.6% to 1.57 billion yuan. The company was sitting on 14.7 billion yuan in cash and short-term investments by the end of last year, up by 13.8% from the 12.9 billion yuan at the end of 2023. 

In terms of quarterly performance, Kanzhun's revenue grew by 15.4% year-on-year in the fourth quarter to 1.82 billion yuan, marking a sixth consecutive quarter of double-digit growth. Its net profit for the three months grew by 34.1% to 444.2 million yuan. The company's U.S.-listed shares rose by nearly 5% after the release of its latest report, as investors applauded its ability to continue posting double-digit growth even as many other companies are shrinking and falling into the red.

Kanzhun's business growth owes in no small part to its ever-growing customer base. Its monthly active users (MAU) reached 53 million in 2024, up 25.3% year-on-year, though the figure declined from 58 million in the third quarter to 52.7 million in the fourth. That said, Kanzhun's third-quarter user base was roughly equal to the combined total for three of its biggest rivals, Zhaopin, 51job, and Tongdao Liepin (6100.HK), according to Questmobile, showing just what a giant the company is in China's recruitment sector.

Expanding enterprise-user base

Job seekers are like fish in the sea: The choppier the waves, the more they tend to swim together. Recruitment websites sell resumes of potential employees to employers, and such paid services constitute a large chunk of Kanzhun's revenue.

The company said its paying enterprise customers grew by 17.3% year-on-year to 6.1 million last year. That helped to fuel a jump in revenue from online recruitment services for such enterprise customers from 5.89 billion yuan in 2023 to 7.27 billion yuan last year, acting as a key driver of the company's revenue growth. Revenue from the company's value-added services for job seekers was much smaller but also logged 36.2% year-on-year growth to 85.7 million yuan.

It's also worth noting that Kanzhun is keeping its own costs under control. Its marketing expenses grew 4.1% from 1.99 billion yuan in 2023 to 2.07 billion yuan in 2024, mostly due to an increase in its own employment costs. That was partially offset by a decline in advertising and marketing expenses. By the end of last year, Kanzhun itself employed 5,688 people, up by 6% from 5,346 in 2023, representing an increase of 342 employees. Marketing and sales staff accounted for half of that.

Enter DeepSeek

In terms of technology, Kanzhun has integrated DeepSeek-R1 into Boss Zhipin and is conducting gray-box testing in some of the app's scenarios. It is also using its self-developed Nanbeige AI model to provide services. The company says the combination of Nanbeige and DeepSeek will allow it to cut costs further while ensuring the same level of service to users.

Among its services for recruiters, the platform's AI function can automatically select the most suitable candidates from the Boss Zhipin's vast database of job seekers and recommend them to employers, also providing explanations for its recommendations. More advanced services allow employers to engage with job applicants. Meanwhile, job seekers can use the platform's interactive interface that lets them articulate their needs in more natural language. They can also use the interface to access position and employment-related information and seek answers to their queries, as well as take part in simulated interviews.

UBS expressed its positive view on the company in a report, citing reviving recruitment sentiment from companies since the beginning of the year. It raised its first-quarter and full-year revenue projections for the company by 3.5% and 0.4%, respectively, translating to year-on-year growth to 12.2% and 12.1%. It maintained a "neutral" rating for the stock and increased its target price for Kanzhun's U.S.-listed shares from $17 to $19.50.

Kanzhun currently trades at a price-to-earnings (P/E) ratio of around 40 times, higher than the 19 times for Manpower Group (MAN.US), showing investors are fairly optimistic about the company's future growth. The real test now will be whether China's economy will be able to turn a corner, with such hopes already reflected in the recent rallies for Chinese stocks.

The employment challenge has always been a great concern for China, and that focus will be even bigger this year as the economy remains weak. An estimated 12.22 million college graduates are expected to enter the workforce in the summer, and it will quickly become clear if the job market has enough demand to absorb so many newcomers. That represents both a challenge and opportunity for job recruiters.

Kanzhun continues to boast leadership in the human resources industry thanks to the steady rise in people looking for jobs, and its ability to keep providing better service through its use of AI and other means. It will need to keep using such advantages to stay ahead of its adversaries, which includes not only rival recruitment agencies but also conservatism among its core enterprises customers as they wait to see if China's economy has indeed turned a corner.