2Q22 results slightly missed our expectations
Bilibili announced 2Q22 results: Revenue grew 9.2% YoY but fell 2.9% QoQ to Rmb4.91bn, and non-GAAP net loss was Rmb1.96bn vs. a loss of Rmb1.32bn in 2Q21, with a net margin of -40.0%. The firm’s results missed our expectations, as its revenue came under pressure and R&D and G&A expense ratios were higher than expected. The firm expects its 3Q22 revenue to reach Rmb5.6-5.8bn, lower than our previous expectations of Rmb5.83bn and market consensus of Rmb5.92bn).
Trends to watch
External challenges persist; commercialization decelerates. The number of the firm’s monthly active users (MAU) exceeded 300mn, and traffic increased 48% YoY in 2Q22. We believe the firm has a healthy community ecosystem, but macroeconomic downturn weighed on commercialization. Advertising revenue rose 10.4% YoY to Rmb1.16bn, but advertisers' willingness to invest recovered slowly. The firm expects advertising revenue growth to remain under pressure in 2H22.
Revenue from its value-added service grew 28.7% YoY to Rmb2.10bn, and the firm’s number of monthly paying users (MPU) increased 31.6% YoY to 27.5mn, with the paying rate declining 0.3ppt QoQ to 9.0%. We note that tightening regulations on the introduction of animated series has weighed on the revenue growth of its premium membership program.
The firm’s mobile game business revenue fell 15.2% YoY to Rmb1.05bn, as fewer new games were launched in 1H22. Self-developed games contributed about 5% of revenue, as Artery Gear: Fusion was released overseas. So far, the firm has gained approval for four games in China and plans to launch six games overseas in 2H22. We expect the firm’s mobile game business to recover in 2H22 with more new games being launched. E-commerce revenue and other income increased 4.0% YoY to Rmb601mn.
Pressure on revenue growth drags progress of cost reduction and efficiency enhancement; narrowing of expense ratio missed expectations. The firm’s 2Q22 gross profit declined 1.0ppt QoQ to 15.0%, due to the pressure on revenue growth. The sales expense ratio fell 1.1ppt QoQ to 23.9%, which was effectively controlled, in our view. Bilibili’s G&A expense ratio rose 1.7ppt QoQ to 12.7%, mainly due to expenses incurred while optimizing the organizational structure. Its R&D expense ratio grew 2.6ppt QoQ to 23.1%, due to increased expenses on ending some game projects, as the firm adjusted its R&D portfolio of self-developed games in 1H22.
Strengthening commercialization capabilities; profitability to improve gradually. The firm proposes a core strategy for the next three years, focusing on growth, putting community first and developing both its ecosystem and businesses. Bilibili continues to enhance its commercialization capabilities. Looking ahead, we expect the firm’s revenue to grow rapidly along with improvements in the macroeconomy and commercialization.
In terms of cost reduction and efficiency enhancement, the firm expects 4Q22 gross margin to gradually rebound to 20%. We believe the firm’s efforts in optimizing the organizational structure to pay off, and expense ratio to narrow. Bilibili expects its 4Q22 non-GAAP net profit margin to rise to -30%. We believe that the recovery of revenue growth will drive profit growth, and the firm’s profitability is likely to improve in the long run.
Financials and valuation
We lower our 2022 and 2023 revenue forecasts 2.7% and 1.4% to Rmb22bn and Rmb30.2bn, and we cut our 2022 and 2023 non-GAAP net profit forecasts by Rmb531mn and Rmb66mn to -Rmb7.3bn and -Rmb4.5bn, considering lingering impacts from the macroeconomic environment. The stock is trading at 2.8x 2022e and 2.1x 2023e P/S. Maintain OUTPERFORM. We cut our SOTP-based TP 14.3% to US$30, implying 3.6x 2022e and 2.7x 2023e P/S with 27.0% upside.
Risks
Headwinds from the COVID-19 resurgence; slower-than-expected progress in cost reduction and efficiency enhancement; content regulations.
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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。