JPMorgan has released a research report stating that they have a positive outlook on the future stock price of Bilibili-W (09626). Future stock price catalysts include the start of Season 2 for the game 'Three Kingdoms: Fate of the Crown' in early August and the disclosure of more balanced operating profit and loss targets during the announcement of second quarter financial results. They believe that with strong gaming performance, the market's forecast for Q3 earnings will have room for upward growth. The report maintains a 'shareholding' rating with a HKD 165 target price.
JP Morgan pointed out that the bank raised the rating of Bilibili to 'shareholding' in mid-June. Although some investors agreed with the view that the group's profits will enter an upward cycle in the next 1-2 years, there are also voices questioning the sustainability of the revenue of 'Three Kingdoms: Strategy to Win the World' and the growth momentum beyond the game business, resulting in its stock price performance remaining roughly stable.
The report believes that since its release in July, the game 'Three Kingdoms: Strategy to Win the World' has shown strong cash revenue performance, ranking 11th in the domestic IOS revenue list and driving first-month cash revenue to exceed RMB 0.6 billion. In addition, the bank sees strong demand from advertisers, which benefits from improved ad conversion rates driven by AI, and expects advertising revenue to maintain strong growth in the next 2-3 years. Fan subscriptions are also becoming a new source of income for content creators, in addition to advertising, and will become another growth driver for value-added service income.
The report predicts that Bilibili's second-quarter revenue will increase by 15% year-on-year, and adjusted earnings per share will roughly meet market expectations. During the period, driven by e-commerce advertising, advertising revenue will maintain strong growth of 27%, and game revenue will also increase by 10%.