20230602-招银国际-Prioritizing_profitability_and_quality_user_growth_7页_1mb

Bilibili (BILI US) reported flat-year-over-year revenue of RMB5.1 billion in the first quarter of 2023, slightly below initial expectations, while adjusted net loss narrowed by 38% to RMB1.0 billion, better than consensus estimates. The improvement in profitability stems from a strategic focus on high-quality user growth and enhanced monetization. Key metrics include a 18% year-over-year increase in average daily active users (DAUs) to 94 million, with a higher DAU/MAU ratio of 29.7%.

For the second quarter of 2023, revenue is forecasted to grow by 7% year-over-year to RMB5.2 billion, with further narrowing of net losses sequentially. The full-year 2023 revenue outlook was revised down by 3% to RMB24.1 billion due to reduced visibility in the games business, while earnings forecasts largely remain unchanged. The target price per ADS was lowered to US$27.2, reflecting market uncertainty and slower revenue growth, with a 9% reduction from the previous price.

Strong performance in ad revenue (+22% YoY, now 25% of total revenue) and VAS revenue (+5% YoY, 43% of total revenue, supported by live streaming growth) drove key positives. However, mobile games revenue dropped 17% YoY to RMB1.1 billion due to a lack of new titles, though upcoming games like Pretty Derby may provide future growth. Gross margin improved to 21.8%, driven by cost savings.

The firm maintains a BUY rating, citing potential for further gross margin improvements and net loss reduction through cost controls. However, risks include ongoing pressure in the games sector and broader market uncertainties. Peer comparisons show Bili's valuation at 3.2/2.9x 2023/2024 price-to-sales, with segments like ad and online games facing competitive challenges.