20200306-天灏资本-Expect_Strong_4Q19_Performance__BIGO_Driving_Better_Monetization_In_1Q20_6页_810kb

JOYY Inc. 2020 Q4 and Q1 Performance Summary

Core Content Overview

This report provides an analysis of JOYY Inc.'s financial performance and market outlook for the fourth quarter of 2019 (4Q19) and the first quarter of 2020 (1Q20). It highlights the company's expected revenue growth, the performance of its key business segments, and investment risks. The report also includes a Buy rating with a target price and financial data for various periods.

Key Financial Highlights

Revenue Expectations

• 4Q19 Revenue: Expected to exceed the company's guidance range of RMB7,320M – RMB7,520M.
• 1Q20 Revenue: Likely to show growth in Huya and BIGO, with YY Live experiencing a slight decline due to government policy changes.

Business Segment Performance

• YY Live:
  • Revenue growth of 6.0% Y/Y in 4Q19.
  • Slight decline of 5.0% Y/Y in 1Q20 due to the lucky draw policy.
  • Hourly average concurrent users (ACU) increased by 40.7% in 1Q20, while hourly average concurrent hosts (ACH) decreased by 6.9% Y/Y.
• Huya Live:
  • Revenue growth of 59.1% Y/Y in 4Q19 and 52.3% Y/Y in 1Q20.
  • ACU and ACH both showed growth in 1Q20 compared to 4Q19.
• BIGO:
  • Strong monetization and user growth, adding users from Saudi Arabia, the U.S., and Japan.
  • Expected to contribute more revenue in 2020 as monetization progresses.

Valuation and Price Target

• Current Price: $58.58
• Target Price: $70.00
• Valuation Basis: Based on a 9.6X PE multiple to non-GAAP 2021E EPS of RMB49.94.
• Historical Average PE: 14.9X 12-months forward PE.

Financial Projections (in RMB millions)

Period	2018A	2019E	2020E	2021E
Q1	3,249	4,781	6,779	4,450
Q2	3,773	6,295	7,707	6,640
Q3	4,100	6,882	8,589	9,170
Q4	4,641	7,466	9,553	11,270
FY Revenue	15,764	25,424	32,628	40,061
FY EPS (Non-GAAP)	49.16	27.69	31.52	49.94

Investment Risks

1. User Growth Challenges: YY Live may face reduced user growth rates as it matures.
2. Integration Risks: The recent acquisition of BIGO may lead to integration issues, particularly affecting margins.
3. Host Concentration: Revenue is heavily dependent on popular hosts, which could limit growth if host concentration remains high.
4. Government Regulations: Increased scrutiny and potential new regulations could impact the live broadcasting industry.
5. Intense Competition: The online entertainment space is highly competitive with various players.
6. Macro Slowdown: Economic slowdown in China could negatively affect the company's growth.

Key Figures and Trends

• BIGO Live Beans Growth: Increased by 9% in January 2020 compared to the average monthly beans in 4Q19.
• User Base Expansion: BIGO added users from Saudi Arabia, the U.S., and Japan.
• Gross Profit Trends: Maintained profitability across segments with consistent gross margins.
• Non-GAAP EPS: Expected to increase in 2020, reflecting improved financial performance.

Conclusion

JOYY Inc. is expected to show strong performance in 4Q19, with revenue likely exceeding guidance. BIGO is a key growth driver, showing improved monetization and international user growth. Despite challenges from government policies and competition, the company maintains a Buy rating with a target price of $70.00, based on a 9.6X PE multiple. However, the potential for higher valuation based on a sum-of-the-parts approach is noted, suggesting that the current price may be undervalued. Investors should be aware of the various risks, including regulatory changes and integration challenges, that could impact future performance.