First Shanghai issued a research report, stating that bilibili (BILI.US/09626) Q1 revenue was 5.66 billion yuan, up 11.7% year-on-year, slightly higher than market expectations. The gross margin was 28.3%, up 6.5 pcts year-on-year, mainly due to the increase in the proportion of high-gross-margin advertising business and cost optimization on the cost side; the operating profit margin was -14.5%, narrowed by 12.6% year-on-year. GAAP net loss was 0.76 billion yuan, non-GAAP net loss was 0.44 billion yuan, narrowed by 55.8% year-on-year, slightly higher than the market consensus of the loss of 0.5 billion yuan. The revenue is expected to achieve double-digit growth next quarter, with a slight increase in gross margin, and is expected to achieve a break-even point for non-GAAP operating profit in Q3.
The bank pointed out that the company's Q1 advertising revenue increased by 31.2% year-on-year, reaching 1.67 billion yuan, of which the revenue from performance advertising increased by 50%. The continuous synergy effect of various advertising scenarios superimposed on the Huohua platform has continuously helped the growth of advertising business. In the following quarters, the company will continue to explore more advertising scenarios, and we expect the annual advertising revenue growth rate to be 24%.
The bank further pointed out that the company's Q1 game revenue was 0.98 billion yuan, a year-on-year decrease of 13.2%. After the SLG game 'Three Kingdoms: Strategic Pass' was launched in June, it ranked in the top three of the iOS bestseller list. It is expected to generate 3 billion yuan in revenue in 2024, and according to the proportion of revenue split for agency games, the company can obtain 70% of the game revenue. Referring to the long-term revenue situation of SLG games, it is expected that the annual revenue of 'Three Kingdoms: Strategic Pass' in 2025 will be 5 billion yuan, contributing 3.5 billion yuan to the company's revenue.
The bank stated that the company's revenue for 2024-2026 is expected to be 26.4/29.1/30.9 billion yuan, with a three-year CAGR of 11.2%. Net profit attributable to the parent is expected to be -1.8/-0.2/0.5 billion yuan, and the net profit margin is -6.7%/-0.6%/1.4%. Considering the improvement of the company's gross margin, taking WACC as 12%, the target price discounted to 2024 is $20.00/156.23 HKD, which still has 28.80%/27.84% growth space compared to the current stock price, and is given a buy rating.