China's Aging Population And Mounting Regulation Will Hamper Recruitment

Key Takeaways

• Structural demographic challenges and rising regulatory scrutiny threaten Kanzhun's market size, increase compliance costs, and add volatility to future margins.
  
• Slowing user growth, intensified competition, and rapid AI innovation could erode profitability, forcing higher marketing and R&D spend just to maintain market position.
  
• Accelerating user growth, AI-driven efficiency, and expanding margins position Kanzhun for sustained profitability, stronger market share, and flexible reinvestment in innovation and international expansion.

Catalysts

Provides online recruitment services in the People’s Republic of China.

• The persistent demographic decline in China, with an aging population and declining birth rates, is set to reduce the available labor pool and long-term demand for recruitment services; this structural headwind directly limits Kanzhun's addressable market and places future revenue growth at risk.
  
• Increasing government regulation targeting technology platforms, especially around data security and online operations, is likely to result in higher compliance costs for Kanzhun and might force changes or constraints on product offerings, leading to margin pressure and possible revenue volatility in future periods.
  
• Despite recent monetization progress, the company's user growth is showing early signs of deceleration, particularly among new graduates-a segment that declined over 20 percent year-on-year-signaling that Kanzhun may be nearing saturation in key population groups, raising doubts about the sustainability of top-line growth and future ARPU expansion.
  
• Escalating competition in the online recruitment industry, driven by both established players and aggressive start-ups, could trigger price wars and necessitate increased marketing spend to retain or attract users, eroding net margins and slowing earnings growth even as marketing expenses are already hypersensitive to shifts in user acquisition costs.
  
• Rapid advances in AI-driven recruitment automation could marginalize Kanzhun's core platform business, requiring heavier R&D investments merely to keep pace, while displacing traditional platform-based job matching models and putting future gross and operating margins at risk as more hiring activity bypasses standard marketplaces.

Kanzhun Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Kanzhun compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Kanzhun's revenue will grow by 10.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 24.5% today to 23.9% in 3 years time.
• The bearish analysts expect earnings to reach CN¥2.5 billion (and earnings per share of CN¥5.41) by about August 2028, up from CN¥1.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 25.2x on those 2028 earnings, down from 37.5x today. This future PE is lower than the current PE for the US Professional Services industry at 27.4x.
• Analysts expect the number of shares outstanding to decline by 1.45% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.52%, as per the Simply Wall St company report.

Kanzhun Future Earnings Per Share Growth

Risks

• Strong secular and company-specific growth trends are evident, with revenues rising nearly 10 percent year-on-year and net income jumping over 70 percent, supported by expanding user numbers and improving supply-demand dynamics; this robust financial momentum increases the likelihood of continued revenue and earnings growth.
  
• Sustainable margin expansion is highlighted by a record high net margin exceeding 33 percent and adjusted operating margin of nearly 42 percent, both improving for three consecutive quarters, with management attributing this to scale efficiencies and effective cost control, which could underpin higher net income and profitability in the coming years.
  
• High user growth and penetration, including 30 million newly verified users year-to-date and a 16.5 percent year-on-year increase in active users, combined with rising enterprise client willingness to pay and solid growth in paid enterprise customers, position Kanzhun well for ongoing top-line expansion.
  
• Accelerated AI adoption and innovation are driving greater operational efficiency, lower costs, and enhanced product offerings on both the employer (AI for job posting optimization and recruiter agents) and job seeker side; this technology-led differentiation could support higher operating margins and expanded market share.
  
• A strong balance sheet with over RMB 16 billion in cash reserves and robust operating cash flow exceeding RMB 1 billion per quarter gives Kanzhun ample flexibility to invest in R&D, potential overseas expansion, and shareholder returns such as dividends and repurchases, which can further boost investor confidence and support the share price.

Valuation

• The assumed bearish price target for Kanzhun is $15.8, which represents two standard deviations below the consensus price target of $21.18. This valuation is based on what can be assumed as the expectations of Kanzhun's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $25.07, and the most bearish reporting a price target of just $14.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be CN¥10.3 billion, earnings will come to CN¥2.5 billion, and it would be trading on a PE ratio of 25.2x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of $21.07, the bearish analyst price target of $15.8 is 33.3% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.