3Q22 revenue +11% yoy, inline, NG net loss was RMB1.76bn, improved sequentially and lower than RMB1.83bn of consensus
Mgmt. reiterated their NG OP breakeven target by the end of 2024, looking to buy back CB, positive for LT sustainability
BUY: Tighter expense discipline a positive, TP lowered to USD29
　　Expense discipline drove lower 3Q22 net loss
　　Revenue up +11%/+18% yoy/qoq to RMB5.8bn, 1% above consensus forecast, where mobile game and advertising segments see some sequential improvement with yoy growth of +6%/+16%, vs. -15%/+10% in 2Q22 respectively. VAS segment revenue +16% yoy in 3Q22, slowed down from 2Q22, mainly due to softer membership revenue. NG net loss was RMB1.76bn, vs. RMB1.96bn in 2Q22 and lower than consensus forecast of RMB1.83bn. The beat on NG net loss is mainly due to cost and expenses control, especially in selling and marketing expenses. DAU and MAU maintain at decent growth of 25%/24% yoy with DAU/MAU ratio now at 27%, target to reach 30% next year.
　　Enhanced discipline to reach 2024 breakeven
　　Mgmt. reiterated their target for NG OP breakeven in 2024, with efforts to continue to rein in selling and marketing expenses, more diligent in R&D and investments in new businesses. Efforts to reduce IT, bandwidth, and selling expenses have helped contribute to better 3Q22. Bili is also looking to buy back its convertible bonds. 3Q22 total cash and ST investments reached USD3.4bn, per Mgmt., outstanding CB at face is USD2.5bn but at 40% discount for market value, leaving c.USD1.9bn, sufficient for operating needs. We estimate if NG net loss could less than RMB3.0bn (or RMB750mn per quarter, which is near half of 3Q22 level), then Bili should be able to achieve FCF breakeven assuming RMB3bn D&A expenses and RMB1bn working capital cash inflow, and reduced Capex (PP&E and intangibles) to RMB1bn (back to 2017/18 level). This effort will not be easy, and might have impact to growth trajectory, but overall we believe the shift to more financial disciplined strategy is a positive for long term sustainability given macro backdrop and market condition.
　　4Q22 outlook: softer growth but lower loss
　　Bili provided 4Q22 revenue guidance of RMB6.0-6.2bn (+3.6%-7.0% yoy), which is lower than our previous estimate of RMB6.8bn (+17% yoy) and consensus previous expectation of RMB6.3bn (+9% yoy). We forecast yoy decline in 4Q22 for gaming and advertising segment given macro challenges and last year high base, while VAS should maintain brisk growth at 22% yoy. Given company’s breakeven target, we anticipate more expense reductions and NPM to improve, we forecast FY22/23/24E NPM to be -32%/-16%/-5%. While we also lowered FY22-24E revenue CAGR to 23%, vs 26% previously.
　　BUY: Incrementally healthier outlook
　　We revised revenue -3%/-5%/-7% and NG net loss -2%/-14%/-24% in FY22/ 23/24E, due to more conservative on VAS and advertising segment revenue growth while more optimistic on margin improvement outlook. We revised down our SOTP-TP from USD31 to USD29, due to earnings revision and FX changes, while maintain our target multiples unchanged. Our TP implies 3.1x/2.5x FY23/ 24E P/S. Key Risks: 1) Macro/consumption; 2) Regulation; 3) Competition; 4) Gaming pipeline.
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【免责声明】本文仅代表第三方观点，不代表本站立场。投资者据此操作，风险请自担。