20230215-招银国际-Looking_beyond_1Q23E_soft_seasonality_6页_845kb

JOYY Inc. (YY US) Equity Research Summary

Core Content

This report provides an equity research update on JOYY Inc. (YY US), focusing on its financial performance, business segments, and future outlook. The analysis is based on company data, Bloomberg, and CMB International Global Markets (CMBIGM) estimates.

Main Points

• Financial Outlook:

  • 4Q22E: Revenue is expected to decline by 9% YoY, with the adjusted net profit at US$2mn, margin diluted by Shopline's losses.
  • 1Q23E: Revenue is expected to decline by 6% QoQ due to CNY and Ramadan disruptions and competition pressure.
  • 2H23E: Bigo Live is expected to resume growth with Middle East stabilization and rising paying users.
  • FY23E/FY24E: Adjusted net profit margin is projected to reach 6.1% and 6.8% respectively, supported by narrowing losses from Hago and Likee, and cost discipline.

• Earnings and Valuation:

  • CMBIGM slightly trimmed FY22E-24E revenue by 0.0–2.6% to reflect the softness of 1Q23E and livestreaming headwinds.
  • The new target price (TP) is set at US$49, down from US$50, based on a SOTP valuation model with a 6x FY23E P/E multiple for Bigo Live.
  • The TP implies a 23.3x FY23E P/E, which is below the industry average due to slower growth and competition pressures.

• Segment Performance:

  • Live Broadcasting: Dominates the revenue mix, with 88.4% of total revenue in FY23E.
  • Bigo Live: Revenue is expected to decline by 3% QoQ in 4Q22E (-18% YoY), but is anticipated to recover in 2H23E.
  • Shopline: Contributes to margin dilution, with monthly losses estimated at US$10mn in FY23E.
  • Others: Includes a variety of businesses such as Hago and Likee, which are expected to achieve breakeven in FY23E.

• Margin Trends:

  • Adjusted net margin is projected to increase from 5.6% in FY22E to 6.1% in FY23E and 6.8% in FY24E.
  • Operating margin is expected to improve from -12.1% in 4Q22E to 6.3% in FY23E and 7.0% in FY24E.

• Valuation Analysis:

  • SOTP Valuation: Based on:
    • YY Live: US$1.9bn (conservative estimate from Baidu transaction)
    • Huya: Based on market cap
    • Bigo Live: US$1.7bn (6x FY23E P/E)
  • Total Valuation: US$3,830mn
  • Equity Value: US$3,514mn after applying a 30% holding discount
  • Target Price: US$49, reflecting the adjusted valuation

Key Information

• Current Price: US$35.9
• TP Change: Target price reduced by 2% to US$49
• P/E Ratios: FY23E P/E at 17.2x, FY24E at 15.1x
• P/S Ratios: FY23E at 1.0x, FY24E at 1.0x
• Yield: Expected to increase from 8.3% in FY23E to 9.1% in FY24E
• Shareholding Structure:
  • T Rowe Price Group: 9.60%
  • Capital Group: 4.67%
  • BlackRock: 4.65%

Performance Summary

• 1-Month: -3.1%
• 3-Months: +17.6%
• 6-Months: +25.4%
• 12-Months: Price performance with a 12-month chart provided

Analyst Ratings

• CMBIGM Rating: BUY
• Potential Return: Over 15% over the next 12 months

Financial Summary

Income Statement

Cash Flow Summary

Balance Sheet Highlights

Key Ratios

Conclusion

• JOYY is expected to navigate the soft seasonality in 1Q23E and resume growth in 2H23E, particularly for Bigo Live.
• Despite short-term margin dilution from Shopline and FX losses, long-term margin improvement is anticipated.
• The SOTP-based target price of US$49 reflects a conservative approach, considering the competitive landscape and macroeconomic challenges.
• CMBIGM maintains a BUY rating, suggesting potential for a return of over 15% over the next 12 months.