20231130-招银国际-Game_business_weighed_on_revenue_growthdespite_resilient_ad_and_VAS_business_7页_1mb

Bilibili Financial and Operational Summary

• Key Financial Results (Q3 2023):

  • Total revenue remained flat year-over-year at RMB5.81 billion, aligning with consensus, but adjusted net loss narrowed by 50% YoY to RMB878 million due to higher-than-expected investment losses.
  • Ad revenue was up 21% YoY to RMB1.64 billion, boosted by performance-based ads and e-commerce integration, contributing 28% to total revenue.
  • VAS revenue increased 17% YoY to RMB2.60 billion, primarily from live streaming growth.
  • Mobile games revenue declined 33% YoY to RMB992 million due to lack of new titles and a high base from Space Hunter 3 release.
  • Adjusted net loss margin improved to -15.1% versus -30.4% in the same period last year, with operating cash flow turning positive.

• Forward Guidance:

  • Bilibili expects FY2023 total revenue to be at the lower end of the RMB22.5-23.5 billion range, driven by weaker mobile game performance.
  • For 4Q2023, revenue is forecasted to grow 3% YoY, supported by ad and VAS growth (+25% and +18% YoY respectively), partially offset by mobile games decline (-5% YoY).
  • Breakeven target remains on track by end of FY2024, based on SOTP valuation.

• Business Highlights and Growth Drivers:

  • User base expansion: Average daily active users (DAU) reached a record 103 million, up 14% YoY, with a DAU/MAU ratio of 30.1% indicating improving quality.
  • Commercial ecosystem: Revenue from video and live commerce products grew over 250% YoY during Double 11, with content creators receiving income increasing by more than 160% YoY.
  • Mobile game business streamlined its development team, expected to improve R&D efficiency through reduction.
  • Ad business benefited from partnerships with e-commerce platforms, with ad revenue from e-commerce growing over 90% YoY.

• Valuation and Recommendations:

  • Maintain BUY rating with a target price of US$24.0 per ADS, implying a 79.9% upside from the current US$13.34 price.
  • SOTP valuation assigns US$10.1 to the ad business (42.1% of total valuation, based on 16x 2024E PE), US$9.1 to VAS (38.0%, based on 2.5x PS), US$4.5 to mobile games (18.8%, based on 15x PE but at discount due to game track record), and US$0.3 to IP derivatives and others (1.2%).
  • Peer comparison shows Bilibili's performance relative to online games and advertising peers, with focus on revenue growth and profitability metrics.

• Financial and Operational Metrics:

  • Gross margin rose to 25.0%, exceeding consensus, driven by cost controls; adjusted net margin improved gradually with positive operating cash flow.
  • Long-term prospects: FY2023E gross profit stands at RMB5,422 million, with revenue growth expected to be modest at 2.8% YoY, while operating margin saw a decline in some periods but positive trends in adjusted metrics.

Conclusion

Bilibili is seen as a strong candidate for breakeven by FY2024, supported by resilience in non-game segments, a growing user base, and effective cost management. The BUY recommendation reflects upside potential from current valuation levels.