20211111-招银国际-Reinvesting_for_growth_4页_834kb

Huya (HUYA US) Summary

Core Content and Key Highlights

Huya, a leading game streaming platform in China, delivered better-than-feared 3Q21 results, with revenue and adjusted net profit rising 6% and 50% YoY, respectively, to RMB3.0bn and RMB180mn. These figures exceeded the consensus estimates, with revenue at -3% vs. consensus and adjusted net profit at +130% vs. consensus. The company's mobile MAU increased 15% YoY to 85 million, and MPU rebounded sequentially to 6 million, with a paying user ratio of 7.1%.

Following the termination of the Douyu merger, Huya is refocusing on content investment, overseas business expansion, and video-lization. The company is expected to reinvest in content and user acquisition, which may lead to reaccelerating revenue growth in the future.

Financial Performance and Forecasts

Revenue and Profit Trends

• 3Q21 Revenue: RMB3.0bn (+6% YoY, -3% vs. consensus)
• 3Q21 Adj. Net Profit: RMB180mn (-50% YoY, +130% vs. consensus)
• Live Streaming Revenue: Down 2% YoY
• Other Revenue: Up 137% YoY due to content licensing

Revenue Forecasts

Adjusted Earnings Per Share (EPS)

• 3Q21 Adj. EPS: RMB0.75
• FY21E Adj. EPS: RMB1.52
• FY22E Adj. EPS: RMB(0.83)
• FY23E Adj. EPS: RMB1.26

Adjusted Net Profit

• FY21E Adj. Net Profit: RMB372mn
• FY22E Adj. Net Profit: RMB(208)mn (net loss)
• FY23E Adj. Net Profit: RMB323mn

4Q21E Outlook

• Revenue: Expected to decline -3% YoY, with livestreaming down -4% and others up +4%.
• User Metrics: Flat QoQ due to a high base in 3Q21.
• Gross Profit Margin (GPM): Likely to be negative due to factors such as S11 tournament costs, higher content costs for host incentives, and seasonal campaigns.
• Adj. OPM: Estimated at -15%.

FY22E Outlook

• Revenue: Expected to grow +7% YoY to RMB12.2bn.
• Adj. Net Profit: Projected to be RMB(208)mn, resulting in a net loss.
• MAU Growth: Estimated at +6% YoY.
• Overseas Revenue: Targeted to double in FY22E, contributing 6%–7% of total revenue.
• GPM: Expected to be 10% for the full year, with negative performance in the second half due to seasonality.

Valuation and Target Price

• Current Price: US$8.95
• Target Price (TP): US$11.0 (revised from US$12.0)
• Up/Downside: +22.9%
• P/E Ratio: 37.8 (FY21E)
• P/S Ratio: 1.2 (FY21E)
• ROE: 3.7% (FY21E)
• Net Gearing: Net cash (FY21E)

Shareholding and Stock Data

• Market Cap: US$1,987mn
• Avg 3 Mths Turnover: US$28.62mn
• 52-Week High/Low: US$36.33 / US$7.52
• Total Issued Shares: 85mn

Shareholding Structure

Share Performance

Analyst Recommendation

• Rating: BUY
• Reasoning: The company is reinvesting in content and user acquisition, which could drive reaccelerated revenue growth in the future. Despite short-term challenges, the strategic shift is expected to lead to longer-term value creation.

Key Ratios and Margins

• Gross Margin: Expected to decline to 13.5% in FY21E from 14.5% in FY20A.
• Operating Margin: Projected to be -1.0% in FY21E.
• Adj. Net Margin: Expected to be 3.3% in FY21E.
• Effective Tax Rate: -61.6% (FY21E) due to losses.

Strategic Focus

• Content Investment: A key focus area to enhance user engagement and revenue diversification.
• Overseas Expansion: Aimed to double overseas revenue in FY22E, which is expected to improve margins.
• Video-lization: Emphasis on video content to enhance user experience and drive engagement.

Conclusion

Huya is navigating a strategic shift post-Douyu merger, focusing on content investment, overseas growth, and video-lization. While short-term challenges such as negative GPM and net loss are expected in FY22E, the long-term outlook is positive. The BUY rating reflects the potential for over 15% return over the next 12 months, with revenue growth and margin improvement anticipated. The target price of US$11.0 is a revised estimate based on the new strategic direction.