＜Research＞BOCOMI Raises BILIBILI-W (09626.HK) TP to HK$155; 'San Guo: Mou Ding Tian Xia' Propels Accelerated Game Rev. Growth

　　BOCOMI released a report and slightly revised its 2Q24 revenue forecast for BILIBILI-W (09626.HK) -1.500 (-1.181%) Short selling $53.73M; Ratio 17.205% by 1% to RMB6.1 billion, up 16% YoY, mainly due to new games exceeding expectations. Gross margin is expected to expand by 6 ppts YoY and 1 ppts QoQ to 29%, mainly due to scale effect and higher share of advertising revenue. Considering the increased investment in new games, the adjusted net loss of RMB330 million is maintained, continuing the trend of loss narrowing in YoY and QoQ terms.

　　According to the report, the performance of “San Guo: Mou Ding Tian Xia” was outstanding, driving up full-year game revenue forecasts. Since its launch, the game has maintained a top 10 ranking on the best-seller list, with a maximum daily grossing of US$2.5 million and a minimum daily grossing of US$500,000, according to Diandian.

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　　Based on the nine-month grossing amortisation, BOCOMI raised its game revenue forecasts on BILIBILI for 2024 and 2025 to RMB5.4 billion and RMB6.7 billion, with corresponding YoY growth rates of 34% and 23%, and expected “San Guo: Mou Ding Tian Xia” to contribute 26% and 43% of the game revenue.

　　With the adjustments to game revenue forecasts, BOCOMI also lifted its 2024 and 2025 total revenue forecasts by 5% and 8% respectively. Considering that the incremental revenue will be partially offset by increased marketing investment, the broker maintained its 3Q24 turnaround forecast and slightly raised its 2025 net profit forecast. The broker believed that with the start of the next season in August, daily grossing may return to a high level. Short-term new game advertising investments are mainly to attract/retain users and lay the foundation for long-term operation, and new games will gradually release profit contributions after investments return to normal.

　　The broker raised BILIBILI's US ADS and H-shares target price to US$20 and HK$155 respectively, up from US$17 and HK$132. The company's H-shares retreated nearly 8% on 15 July, which may mainly reflect the decline in daily grossing and investors' concern about the impact of buying volume on profitability.

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　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-07-16 16:25.)

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