Near-term market fluctuations don't overshadow long-term potential

We view online recruitment as one of the few subsectors within China's internet sector with substantial room to improve online penetration and less regulatory risks. Despite weak hiring sentiment among enterprises due to the macro slowdown and COVID impact in the near term, we note improvements in the recruitment market since June, based on third-party data and our checks. We expect the online recruitment market to gradually recover in H222, following the trough in Q222, and are positive about its long- term structural growth opportunity. We estimate a 25.6% market size CAGR (2022- 26E), reaching Rmb109.7bn in 2026E, driven by an increasing imbalance between talent demand and supply, and an accelerated shift online post COVID across enterprise and job seeker groups. We believe online recruitment platforms, are the key beneficiaries of this secular growth, and are also well positioned to capture additional opportunities in the larger HR services market.

Blue-collar segment should outgrow the market

We see the largest growth potential in the blue-collar segment, which has a large user base, high job switching frequency and low online penetration. We expect the blue- collar segment to reach Rmb57.8bn and account for 52.7% of total online recruitment in 2026E. Relative to the white-collar segment, blue-collar recruitment is highly fragmented and heavily reliant on offline channels such as referrals among acquaintances and agencies. However, given increasing difficulties sourcing skilled workers, we believe the advantages of online platforms, which can provide more efficient and lower cost job listing and matching on a national scale, will become more important. We see increased activities from industry participants tapping into this market, with innovative products, improved data authenticity, and premium user experiences facilitating the development of blue-collar online recruitment services.

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