Incident: The company's revenue for the full year of 2023 was 22.528 billion yuan, up 2.87% year on year; net loss was 4.812 billion yuan, a year-on-year narrow 35.91% year on year; adjusted net loss was 3.414 billion yuan, a year-on-year narrow 49.06%; gross sales margin of 24.16%. Among them, the company's revenue for the fourth quarter of 2023 was 6.349 billion yuan (QoQ +9.37%, YoY +3.36%), net loss was RMB 1,297 million (QoQ -3.03%, YoY -13.38%), and adjusted net loss of 556 million yuan (QoQ -36.69%, YoY -57.65%). The adjusted net loss narrowed markedly from month to month. The gross profit margin for the single quarter was 26.15%, and gross margin increased for six consecutive quarters.
The DAU remained above 100 million, and community activity remained high and stable: in the fourth quarter of 2023, the average daily active users of Bilibili reached 100 million (YoY +8%, QoQ -3%), and the average daily usage time of users was over 95 minutes. Under the base of DAU breaking 100 million in the third quarter of 2024 and the average daily user usage time reaching a record high, the two figures for the fourth quarter have recovered somewhat, but they are still at an all-time high. User recognition and user stickiness to the Bilibili community remain at a good level.
Value-added services operate steadily, and live streaming contributed incremental revenue: In 2023, the company's value-added service business revenue was 99.10 billion yuan, up 13.71% year-on-year, including value-added service business revenue of 2,857 billion yuan (QoQ +10.10%, YoY +21.59%) in the fourth quarter. The value-added services business remains the company's main business, with revenue accounting for 43.99% of total revenue for the full year of 2023. Bilibili continues to promote the integrated operation of the live streaming and video ecosystem, not only further enriching the live streaming content ecosystem, but also opening up multiple revenue channels for UP owners. From October to November 2023, during the League of Legends World Finals, more than 120 million users watched League of Legends live broadcasts and other related content on Bilibili.
The advertising business performed well and achieved rapid growth during the year: in 2023, the company's advertising business revenue was 6.412 billion yuan, an increase of 26.56% over the previous year, of which advertising business revenue for the fourth quarter was 1,929 billion yuan (QoQ +17.76%, YoY +27.56%). The company's advertising business performed well throughout the year. In particular, during the Double 11 period, the company developed data cooperation with leading e-commerce platforms and achieved an increase of more than 80% in advertising traffic. UP's main video and live streaming GMV increased rapidly by more than 250% over the same period last year.
The game business is under pressure. Focus on the performance of new game launches during the year: in 2023, the company's mobile game business revenue was 4,021 billion yuan, down 19.92% year on year, of which mobile game business revenue for the fourth quarter was 1,007 billion yuan (QoQ +1.52%, YoY -12.13%). Mobile game revenue declined significantly throughout 2023. The main reason was that “Time Hunter 3” was launched in the second half of 2022, which led to a high base in the previous year, and a decrease in the revenue contributed by new games due to the low number of new games launched in 2023. Classic games such as “Azure Line” and “Fate - Title Designation”, which have been in operation for a long time, remained stable in 2023. Among them, “Azure Line” sales and active users increased year over year. Follow the company's performance of self-developed and agent new game launches in 2024.
Investment advice: The company has recently achieved remarkable results in cost reduction and efficiency, and losses have gradually narrowed. Looking forward to the future, we believe that Station B will continue to maintain the healthy growth of the community ecosystem and continuously promote the company's diversified business process based on users. Currently, the company is in a period of growth and has not yet reached the break-even point. We expect the company's revenue growth rate in 2024-2026 to be 11.23%/13.07%/10.35%, reaching 250.59/283.34/31.125 billion yuan, corresponding PS of 1.3x/1.2x/1.1x. Maintain a “Recommended” rating.
Risk warning: the risk of stricter policy controls, the risk of increased competition in the online video industry, the risk that new game performance falls short of expectations, the risk that advertising and live streaming business growth falls short of expectations, etc.