20220520-招银国际-Challenges_to_linger_4页_782kb

HUYA (HUYA US) Company Update Summary

Core Content

HUYA (HUYA US) released its 1Q22 financial results, showing revenue in line with expectations but non-GAAP earnings exceeding consensus. The company's revenue declined by 5% YoY to RMB2.5bn, with live streaming revenue down 10.1% YoY. However, advertising and other revenue increased by 47.2%, driven by content sub-licensing. Non-GAAP gross profit margin stood at 13.5%, impacted by rising content costs and higher revenue sharing fees. Non-GAAP net profit reached RMB47mn, 25% above the consensus of RMB37mn, attributed to lower-than-expected operating expenses.

Despite the positive 1Q22 performance, the company faces ongoing challenges. For 2Q22E, revenue is forecasted to decline by 19% YoY, with live streaming remaining flat QoQ and ads and other revenue dropping by 44% YoY due to regulatory changes and weaker macroeconomic conditions. The removal of virtual gifting rankings in May is expected to reduce user tipping, further impacting live streaming.

Looking ahead to FY22E, the outlook for live streaming is more cautious due to soft macroeconomic sentiment and regulatory adjustments. The company has trimmed its revenue forecasts for FY22E-24E by 1-6%, reflecting the ongoing impact of the epidemic and live streaming challenges.

Main Points

• 1Q22 Financial Performance:

  • Revenue: RMB2.5bn (-5% YoY, +2% vs. consensus)
  • Non-GAAP GPM: 13.5% (up from 13.4% in previous quarters)
  • Non-GAAP NP: RMB47mn (25% above consensus)
  • Live streaming revenue: RMB2.152bn (-10.1% YoY)
  • Ads and other revenue: RMB313mn (+47.2% YoY)

• 2Q22E Forecast:

  • Revenue: -19% YoY
  • Live streaming: Flat QoQ
  • Ads and other revenue: -44% YoY
  • Regulatory headwinds: Removal of virtual gifting rankings expected to reduce user engagement

• FY22E-24E Outlook:

  • Revenue: Trimmed by 1-6% due to epidemic impact and live streaming challenges
  • Live streaming: Expected to remain under pressure from macroeconomic and regulatory factors
  • Maintained BUY rating with a target price of US$6.0 (0.9x FY22E P/S)

• Margin Trends:

  • Non-GAAP GPM: Expected to decline to ~9% in 2Q22E due to stable revenue sharing ratio and rising content costs
  • Net loss margin: ~3% in 2Q22E, due to continuous opex optimization and one-off costs
  • Margin improvement is expected to delay due to ongoing challenges

Key Information

• Earnings Summary:

  • FY20A Revenue: RMB10,914mn
  • FY21A Revenue: RMB11,351mn
  • FY22E Revenue: RMB9,580mn
  • FY23E Revenue: RMB9,628mn
  • FY24E Revenue: RMB9,877mn
  • Revenue YoY Growth: 30.3%, 4.0%, -15.6%, 0.5%, 2.6%
  • Adj. Net Profit: RMB1,262mn (FY20A), RMB833mn (FY21A), RMB-330mn (FY22E), RMB-148mn (FY23E), RMB103mn (FY24E)
  • Adj. EPS: RMB5.29 (FY20A), RMB3.45 (FY21A), RMB-1.34 (FY22E), RMB-0.59 (FY23E), RMB0.40 (FY24E)

• Stock Data:

  • Market Cap: US$927mn
  • Avg 3 mths t/o: US$12.08mn
  • 52w High/Low: US$18.13 / US$3.04
  • Total Issued Shares: 87mn

• Shareholding Structure:

  • Morgan Stanley: 24.57%
  • Teachers Insurance & Annuity: 8.84%
  • ARK Investment: 6.23%

• Share Performance:

  • 1-mth: -14.1%
  • 3-mth: -36.1%
  • 6-mth: -59.3%

• Target Price and Rating:

  • Target Price: US$6.0
  • Previous Target Price: US$11.0
  • Upside: +45.3%
  • Current Price: US$4.13
  • Rating: BUY

• Financial Ratios:

  • P/S: 0.59 (FY20A), 0.56 (FY21A), 0.67 (FY22E), 0.66 (FY23E), 0.65 (FY24E)
  • ROE: 12.9% (FY20A), 7.9% (FY21A), -3.2% (FY22E), -1.5% (FY23E), 1.0% (FY24E)
  • Net gearing: Net cash in all periods

• CMBIGM Ratings:

  • BUY: Potential return of over 15% over next 12 months
  • HOLD: Potential return of +15% to -10% over next 12 months
  • SELL: Potential loss of over 10% over next 12 months

Analyst Contact

• Sophie Huang: (852) 3900 0889, sophiehuang@cmbi.com.hk
• Eason Xu: (852) 3900 0849, easonxu@cmbi.com.hk

Disclaimer

• This report is for informational purposes only and does not constitute investment advice.
• CMBIGM does not provide individually tailored investment advice.
• Past performance is not indicative of future results.
• The information is based on publicly available data and is not guaranteed for accuracy or completeness.
• CMBIGM is not a registered broker-dealer in the United States and may not be subject to U.S. rules regarding research reports and analyst independence.
• The report may be subject to change without prior notice.
• CMBIGM may have conflicts of interest and may act as a market maker or have investment positions inconsistent with the report's recommendations.
• This report is intended solely for the use of the intended recipients and may not be reproduced, reprinted, sold, or distributed without prior written consent.