Bilibili 3Q23 Financial Report Preview: Revenue is Expected to Remain Unchanged In the Third Quarter, While the Advertising Business Performs Strongly

On November 29th, Bilibili will release its Q3 2023 financial report. On November 2nd, China Merchants Securities released a preview of Bilibili's Q3 2023 financial report, stating that the revenue is expected to remain unchanged and the advertising business performs strongly.

Stock Rating: Increase Holdings

Closing price (at the time of the preview release): 13.86$ (November 2, 2023)

Current closing price: 14.01$  (November 22, 2023)

Target price: 20$

(1). It is expected that the company's losses will continue to narrow.

(2). Advertising and value-added services maintain a growth trend, while game revenue is negatively affected in the short term.

(3). The company's operating data has steadily improved, and it is expected that Q4 advertising revenue will increase year-on-year.

Bilibili's Q3 2023 revenue is expected to remain stable, with a QoQ growth of 9%. The game business is weak, but it is offset by value-added services and advertising business. The company is steadily moving towards net profit, and its operating data is steadily improving, with the loss rate continuing to shrink.

Advertising revenue increased by 25% YoY, brand advertising was weaker than expected, but performance advertising continued to show strong results. Games are the largest source of advertising revenue, and the Double 11 event will drive e-commerce advertising revenue growth. Value-added services revenue increased by 17% YoY, game livestreaming improved with industry recovery, and other livestreaming categories maintained healthy growth. However, the performance of big member revenue was mediocre under cautious content investment.

Game revenue is expected to be weak in the second half of 2023, mainly due to the high base of "Hunter x Hunter 3" and the removal of the new game "Shining Nikki" due to compliance issues. The company has completed modifications to "Shining Nikki" and is awaiting regulatory approval for re-release. Other new games include "Slude" and "Eliuxi: Star Dawn". In 2024, the company expects to release a story-based RPG game "Fenran Tiankong" and a Three Kingdoms-themed SLG game.

Bilibili's net cash continues to increase, and its losses have narrowed for five consecutive quarters, yet the company's valuation is still underestimated. The profit forecast has been slightly adjusted, with the group expected to achieve revenue of RMB 22.7 billion in FY23, a YoY growth of 4%, and a non-GAAP net loss of RMB 3.4 billion. The net loss is expected to narrow down to RMB 1.1 billion in FY24. The target price remains unchanged at $20. The main risks include macro/consumer, regulatory, competition, and game launch plans.