20211118-招银国际-Mixed_3Q21,_with_stepping-up_content_investment_4页_836kb

CMB International Securities | Equity Research | Company Update Summary

Core Content

This report provides an equity research update on Bilibili (BILI US), analyzing its financial performance for 3Q21 and providing forecasts for the remainder of the year and beyond. It highlights the company's mixed results, key revenue drivers, and the analyst's outlook.

Key Financial Performance in 3Q21

• Revenue: Increased by +61% YoY to RMB 5,207 million, 1% above consensus.
• Non-GAAP Net Loss: RMB1,622 million, slightly above the consensus but below the analyst's estimate.
• MAU (Monthly Active Users): Surpassed expectations at 267.2 million, growing +35% YoY and +13% QoQ, 3% above the estimate.
• Segment Performance:
  • Mobile Games: Revenue +9% YoY, slightly below expectations.
  • Ads & VAS: Strong growth of +110% YoY and +95% YoY, respectively, exceeding estimates.
  • Ads: Brand retention rate >75%, and +110% YoY growth, with Huahuo penetration >15,000 uploaders.
  • VAS: Beat expectations, but expected to slow down in 4Q21E with +54% YoY growth.
• 4Q21E Guidance:
  • Revenue is expected to be RMB5.7bn-5.8bn, +48% to +51% YoY, with a midpoint 1% below consensus but 1% above the analyst's estimate.
  • GPM and Opex Ratio: Expected to remain flat QoQ.
  • Stock Price Volatility: Likely due to margin pressure.
• Full-Year Revenue Growth: Remains intact, but margin expectations have been lowered to reflect increased content investment.

Key Revenue Drivers

• Ads & VAS: Continued strong momentum with +110% and +95% YoY growth, respectively.
• Mobile Games: Slightly underperformed due to limited new titles and tightening regulations.
• VAS: Expected to slow down in 4Q21E with +54% YoY growth.
• Others: +77.5% YoY growth, indicating diversification efforts.

Analyst Outlook

• Rating: Maintain BUY.
• Target Price: US$110, unchanged from previous.
• Valuation: Based on 8.5x FY22E P/S.
• Catalysts:
  1. Upcoming game license resumption.
  2. Strong user metrics ahead.
  3. 2022 New Year's Eve Gala.

Financial Highlights

Shareholding and Performance

• Market Cap: US$32,805 million.
• Share Performance:
  • 1-month: +21.8% absolute, +14.4% relative.
  • 3-month: +15.2% absolute, +7.7% relative.
  • 6-month: -11.9% absolute, -25.4% relative.

Shareholding Structure

Financial Ratios

• Operating Margin: -32.8% in FY21E, improving to -28.0% in FY22E, and -22.9% in FY23E.
• Adj. Net Margin: -28.1% in FY21E, -23.2% in FY22E, and -17.1% in FY23E.
• Gross Margin: 21.1% in FY21E, 25.0% in FY22E, and 27.5% in FY23E.
• ROE: -16.6% in FY19A, -38.6% in FY20A, and -29.0% in FY21E.

Key Ratios and Trends

• Revenue Growth: Steady at +61% YoY in 3Q21, with +60.3% in FY21E.
• Adj. Net Profit: Expected to grow +41% in FY22E and +31.1% in FY23E.
• Sales Mix:
  • Mobile Games: 26.8% in FY21E, decreasing to 19.8% in FY23E.
  • Live Broadcasting & VAS: 36.2% in FY21E, increasing to 34.7% in FY23E.
  • Advertising: 23.3% in FY21E, rising to 32.0% in FY23E.
  • Others: 13.6% in FY21E, slightly decreasing to 13.6% in FY23E.

Analyst Certification and Disclaimer

• The analyst certifies that the views expressed accurately reflect personal opinions and no compensation is directly or indirectly linked to the report.
• Disclosure: CMBIS has an investment banking relationship with the companies in the report within the last 12 months.
• Ratings:
  • BUY: Potential return of over 15% over the next 12 months.
  • HOLD: Potential return of +15% to -10% over the next 12 months.
  • OUTPERFORM: Industry expected to outperform the market.
  • MARKET-PERFORM: Industry expected to perform in-line with the market.

Legal and Risk Disclaimer

• The report is not an offer or solicitation to buy or sell any security.
• Investor Risk: There are risks involved in transacting in any securities, and past performance does not guarantee future results.
• CMBIS does not provide tailored investment advice and encourages independent evaluation and consultation with a financial advisor.

Summary

Bilibili delivered mixed results in 3Q21, with revenue growth surpassing expectations and MAU exceeding estimates, despite a non-GAAP net loss that missed consensus. The ads & VAS segments were strong, offsetting slower growth in games. The analyst maintains a BUY rating, with a target price of US$110, and believes the company has strong long-term potential. The stock price may experience volatility due to margin pressure and regulatory challenges, but the user base and monetization trends are positive. The report also highlights upcoming catalysts such as the resumption of game licenses and the New Year's Eve Gala, which could drive future growth.