20220606-招银国际-Muted_growth_on_soft_macro_while_margin_intact_5页_813kb

JOYY Inc. (YY US) Company Update Summary

Core Content Overview

JOYY Inc. (YY US) has released its 1Q22 results and provided updated guidance for FY22E and beyond. The report outlines the company's financial performance, strategic outlook, and valuation metrics, with a focus on the impact of macroeconomic conditions on revenue and margins.

Main Financial Highlights

• 1Q22 Performance:

  • Revenue decreased by 3% YoY to US$624 million.
  • Revenue beat the consensus by 2.0% and high-end guidance by 1.3%.
  • Non-GAAP net profit came in at USD21 million, slightly below consensus but above the estimate.
  • Non-GAAP NPM (Net Profit Margin) improved to 3.3%, compared to -4% in 1Q21, due to continuous cost savings on opex.

• 2Q22E Guidance:

  • Revenue guidance was set at US$579mn to US$600mn, with a midpoint 13% below the consensus.
  • The company expects muted revenue growth in FY22E (flat YoY), primarily due to traffic normalization and soft global macroeconomic conditions.
  • Revenue recovery is anticipated in 2H22E, driven by:
    • Middle East users returning to platforms during Ramadan.
    • New features to offset macroeconomic headwinds.
    • A low base effect.

• Non-GAAP NPM:

  • Expected to remain at 5.5% for FY22E, up from 3.7% in FY21, due to stable GPM for Bigo Live and narrowing losses from other product lines.

Key Business Segments

• Live Broadcasting:

  • Dominates the revenue mix, contributing 93.8% of FY22E revenue.
  • Revenue declined in 1Q22, but the segment is expected to stabilize in the coming quarters.

• Bigo Live:

  • Revenue and paying users dropped by 9.6% and 1.5% YoY, respectively, due to global economic uncertainty and forex depreciation.
  • Europe operations were less impacted, with revenue and paying users increasing by 10.4% and 3.1% YoY.

• Likee:

  • Revenue fell by 11.9% YoY due to proactive adjustments in the post-epidemic period.

Financial Metrics and Valuation

Strong Cash Position

• As of 1Q22, JOYY had a net cash position of ~US$3.2 billion, slightly above its market cap of US$3.0 billion.
• The company has repurchased US$320 million in shares, representing 27% of the total repurchase program (US$1.2 billion), which is expected to support the share price.

Target Price and Recommendation

• Target Price: US$50.0 (down from US$66.0).
• Implied P/E: 17.7x for FY23E.
• Recommendation: Maintain BUY, with a potential return of over 15% over the next 12 months.

Earnings Revisions

• Earnings forecasts for FY22-24E were trimmed by 4%–16% to reflect macroeconomic headwinds, but non-GAAP NPM remained largely unchanged.

Share Performance

• 1-month: -11.3%
• 3-months: -21.7%
• 6-months: -30.4%
• Relative to Market: -8.8% / -11.7% / -11.5%

Auditor and Related Reports

• Auditor: PwC
• Related Reports:
  • Soft guidance on overseas traffic normalization (20 Aug 2022)
  • FY21E guidance intact despite soft 2Q21E (31 May 2021)
  • Bigo's momentum to continue (30 Mar 2021)

SOTP Valuation

• YY Live: Valued at US$3.6 billion based on transaction valuation.
• Huya: Valued based on market cap, contributing ~1,991 million RMB.
• BIGO: Valued at 0.8x P/S for FY23E.
• Total Equity Value (RMB mn): 30,692
• Net Cash: 3,447 RMB mn
• Holding Discount: 20%
• Final Valuation (RMB mn): 34,918
• Target Price (US$): 50.0

Analyst Certification and Disclaimer

• The report is prepared by CMB International Global Markets Limited (CMBIGM), a subsidiary of China Merchants Bank.
• The analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation.
• No liability is accepted for any reliance on the information in this report.
• The report is not an offer to buy or sell securities and is not suitable for all investors.

Important Disclosures

• The report is intended solely for distribution to major US institutional investors.
• CMBIGM is not a registered broker-dealer in the U.S. and is not subject to U.S. regulations on research reports.
• The report is for the use of intended recipients only and may not be reproduced or distributed without prior consent.

Conclusion

JOYY Inc. faces muted revenue growth in FY22E due to soft macroeconomic conditions, but maintains a strong cash position and stable margins. The company is expected to see moderate recovery in 2H22E, supported by strategic adjustments and regional performance. Despite the downward revision in earnings, the BUY recommendation remains due to the company's financial strength and potential for future growth.