According to the company's 23Q4 and 2023 unaudited performance announcements, Bilibili 23Q4's revenue was 6.349 billion yuan, +3.4% year over year; net loss to mother was 1,296 million yuan, a year-on-year decrease of 13.3%; adjusted net loss to mother was 556 million yuan, a year-on-year decrease of 57.7%. In 2023, revenue was 22.528 billion yuan, +2.9% year-on-year; adjusted net loss to mother was 34.25 yuan, a year-on-year decrease of 48.8%. UP's main monetization capacity has been strengthened, and a self-developed game division has been set up, which is expected to be profitable starting in 24Q3. Maintain a buy rating.
Key points to support ratings
The DAU growth rate has slowed, and UP's main monetization capacity has been strengthened. According to Bilibili's official account, the DAU/MAU at 23Q4 B reached 100/336 million, +8%/+3% year over year. The DAU growth rate slowed down compared to Q3 (14%); the average daily usage time was 95 minutes; the average daily active increase was +16%.
In 2023, more than 3 million UP owners received revenue on Station B, +30% over the same period; the number of UP owners receiving revenue through advertising was +94% year-on-year, and over 1.8 million UP owners earned revenue through live streaming.
Advertising efficiency continues to improve, and diversified quality content promotes payment. 23Q4 advertising revenue was 1.93 billion yuan, +28% year over year; annual advertising revenue was 6.41 billion yuan, +27% year over year. The company adheres to the big open loop strategy, and advertising conversion efficiency continues to improve; in January 2024, it released four major scenario marketing plans, including new product launch, rejuvenation, transaction transformation, and major nodes. 23Q4 value-added service revenue was 2.86 billion yuan, +22% year-on-year; annual value-added service revenue was 9.91 billion yuan, +14% year over year. Revenue growth is driven by diversified premium content payments, including virtual anchors, intellectual anchors, Guochuang animation, documentaries, etc. with unique advantages at Station B.
The lack of new products led to a marked decline in game revenue, and a new division for self-developed games was set up. 23Q4 mobile game revenue was 1.01 billion yuan, -12% year over month, +2% month on month; annual mobile game revenue was 4.02 billion yuan, -20% year over year, the decline was mainly due to no key new products launched in 2023. According to a report by Xuebao Financial News Agency, the company issued an internal email on March 4 announcing the establishment of a new first-level department: Self-developed Game Distribution Department. Chen Tongpeng is responsible for reporting directly to the company's CEO Chen Rui. Chen Tongpeng has extensive experience in the operation and distribution of two-dimensional games. He has worked for Tencent and Miha Tour, and has been responsible for the operation of products such as “Collapse 3,” “Genshin,” and “Tower of Magic.” 23Q4 IP derivative and other revenue was 550 million yuan, or -51% year-on-year, and annual IP derivative and other revenue was 2.19 billion yuan, -29% year over year, mainly due to a decrease in e-sports copyright resale revenue and IP derivative sales revenue.
Gross margin has increased dramatically, and personnel have been optimized to reduce costs. The 23Q4 company's gross profit margin was 26.1%, up 5.8 ppts year on year, increasing for 6 consecutive quarters, mainly due to the reduction in platform operating costs after improving monetization efficiency.
The sales expense ratio was 17.7%, -2.9 ppts year on year, and customer acquisition expenses decreased; the R&D expense ratio was 20.9%, -3.4 ppts year over year, mainly due to the optimization of R&D personnel and termination of some game projects; the management cost ratio was 8.1%, -5.2 ppts year over year, mainly due to the decline in the number of administrative staff. 23Q4 operating cash inflow reached 640 million yuan, and operating cash inflow for the full year of 2023 was 270 million yuan (vs. operating cash outflow of 3.9 billion yuan in 2022).
valuations
We expect that the company will continue to optimize gross profit margins and effectively manage expenses, and is expected to start making profits in 24Q3, slightly later than our previous expectations; self-developed games are still highly uncertain. We lowered our 2024 non-GAAP net profit to -520 million yuan. We expect non-GAAP net profit of 2025/26 to be 11.32/1,655 million yuan, corresponding to 2025/26 PE 33.6/23.0 times, maintaining the buying rating.
The main risks faced by ratings
Macroeconomic growth has slowed; newcomers have fallen short of expectations; policy supervision has become stricter; user stickiness has declined.