Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>Further evidence of BILI’s user base peaking reinforces our bearish view on its growth outlook.</li>
<li>BILI’s business model is broken and we believe significant downsizing is unavoidable in the next 12- 18 months to achieve profitability.</li>
<li>The company will survive as a leaner and slightly profitable business valued at high single-digit P/E. We still see tremendous downside from here and advise investors to avoid the stock.</li>
</ul>


Further evidence of BILI’s user base peaking reinforces our bearish view on its growth outlook.
BILI’s business model is broken and we believe significant downsizing is unavoidable in the next 12- 18 months to achieve profitability.
The company will survive as a leaner and slightly profitable business valued at high single-digit P/E. We still see tremendous downside from here and advise investors to avoid the stock.


BILIBILI (BILI US): Cracks in Business Model

China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

<ul>
<li>BILI reported 1Q23 revenue/non-GAAP net income (4.2%)/in-line vs. our estimate, but BILI’s suggested 2Q23 revenue and gross margin are (10%) and (3.5ppts) lower vs. our prior est.; </li>
<li>Gaming will be BILI’s major swing factor.  Although BILI indicated that 2Q23 gaming revenue could decline 10% YoY, we expect that gaming revenue will still grow 6%~ YoY in 2023.; </li>
<li>We maintain SELL rating and cut TP to US$ 14.1. 1Q23’s earning indicates that BILI’s cost saving measures have led to declining MAU.</li>
</ul>


BILI reported 1Q23 revenue/non-GAAP net income (4.2%)/in-line vs. our estimate, but BILI’s suggested 2Q23 revenue and gross margin are (10%) and (3.5ppts) lower vs. our prior est.; 
Gaming will be BILI’s major swing factor.  Although BILI indicated that 2Q23 gaming revenue could decline 10% YoY, we expect that gaming revenue will still grow 6%~ YoY in 2023.; 
We maintain SELL rating and cut TP to US$ 14.1. 1Q23’s earning indicates that BILI’s cost saving measures have led to declining MAU.


BILI US, SELL, TP US$14.1, Target Price Change: Thriving Gaming Market Makes Limited Contribution

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>BiliBili reported 1Q23 results on 1 Jun. Total revenue was flat YoY at RMB5.1bn in 1Q23, in line with CMBI/consensus estimate.</li><li>Adjusted net loss narrowed by 38% YoY to RMB1.0bn in 1Q23, beating CMBI/consensus estimate by 6/10%.</li><li>The better-than-expected profitability was due to Bili’s strategy to prioritize quality user growth and monetization improvement. </li></ul><p><em>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.</em></p>

BiliBili reported 1Q23 results on 1 Jun. Total revenue was flat YoY at RMB5.1bn in 1Q23, in line with CMBI/consensus estimate.Adjusted net loss narrowed by 38% YoY to RMB1.0bn in 1Q23, beating CMBI/consensus estimate by 6/10%.The better-than-expected profitability was due to Bili’s strategy to prioritize quality user growth and monetization improvement. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Bilibili (BILI US) – Prioritizing profitability and quality user growth

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bilibili-inc" target="_blank" data-smartkarma-citation="entities:26793:1" rel="noopener">Bilibili Inc (BILI US)</a> ’s 1Q2023 top line growth remained flat (+0.3%) while cost control measures helped reduce losses. This marks the lowest quarterly revenue growth for the company since 2017.</li>
<li>Mobile games revenue further decreased while Value Added Services (VAS) revenue growth dropped to 5.1% during the quarter, lowest ever for the segment.</li>
<li>There was no disclosure on paying user numbers and we do not expect any significant recovery in top line growth over the next 2-3 quarters.</li>
</ul>



Bilibili Inc (BILI US) ’s 1Q2023 top line growth remained flat (+0.3%) while cost control measures helped reduce losses. This marks the lowest quarterly revenue growth for the company since 2017.
Mobile games revenue further decreased while Value Added Services (VAS) revenue growth dropped to 5.1% during the quarter, lowest ever for the segment.
There was no disclosure on paying user numbers and we do not expect any significant recovery in top line growth over the next 2-3 quarters.


Bilibili: Mobile Game Further Declines and VAS Slowing Down; Cost Controls Help Reduce Losses

Thematic (Sector/Industry)

<ul>
<li>700.HK/NTES/BILI: Tencent, NetEase and Bilibili receive game code approvals (+)</li>
<li>ZLAB：First generic version of Olaparib approved in China but impact on Nariparib should be small（/）</li>
<li>MNSO: Miniso opened its global flagship store in NY Times Square with 78k sales in first day</li>
</ul>


700.HK/NTES/BILI: Tencent, NetEase and Bilibili receive game code approvals (+)
ZLAB：First generic version of Olaparib approved in China but impact on Nariparib should be small（/）
MNSO: Miniso opened its global flagship store in NY Times Square with 78k sales in first day


China TMT Update(May 24) - 700.HK/NTES/BILI/ZLAB/MNSO: Tencent, NetEase, Bilibili Receive Game Code

China

Bilibili Inc. provides online entertainment services. The Company offers a platform that covers a wide array of genres and media formats, including videos, live broadcasting, mobile games, animation, and comics. Bilibili serves customers in China.

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Bilibili (BILI US)

BILIBILI (BILI US): Cracks in Business Model

BILI's business model is broken and the odds are high for a downsizing in its attempt to achieve profitability. We still see tremendous downside to...

Eric Chen

BILI US, SELL, TP US$14.1, Target Price Change: Thriving Gaming Market Makes Limited Contribution

We maintain SELL rating and cut TP to US$ 14.1. 1Q23’s earning indicates that BILI’s cost saving measures have led to declining MAU.

Blue Lotus Research Institute

Bilibili (BILI US) – Prioritizing profitability and quality user growth

BiliBili reported 1Q23 results on 1 Jun. Total revenue was flat YoY at RMB5.1bn in 1Q23, in line with CMBI/consensus estimate.

CMB International

Bilibili: Mobile Game Further Declines and VAS Slowing Down; Cost Controls Help Reduce Losses

Top line growth was flat and VAS revenue grew +5% which is the lowest ever. no disclosure on paying users but our regression model shows MPUs have...

Shifara Samsudeen, FCMA, CGMA

China TMT Update(May 24) - 700.HK/NTES/BILI/ZLAB/MNSO: Tencent, NetEase, Bilibili Receive Game Code

700.HK/NTES/BILI: Tencent, NetEase and Bilibili receive game code (+)；ZLAB：First generic version of Olaparib approved in China（/）；MNSO: Miniso...

Blue Lotus Research Institute

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