Incident: In 2024Q1, Bilibili achieved operating income of 5.665 billion yuan, yoy +12%, and achieved adjusted operating profit of 512 million yuan, a year-on-year narrowing of 52%, achieving adjusted net profit of -456 million yuan, a year-on-year narrowing of 56%, corresponding to an adjusted net profit margin of -8.0%, yoy+12.3pcts.
Comment:
The margin of loss continues to narrow, and gross margin continues to be optimized. The company's 2024Q1 gross margin was 28.3%, yoy+6.6pcts, qoq+2.2pcts, sales and marketing expense rate/general and administrative expense rate/R&D expense ratio was 16.4%/9.4%/17.0%, yoy-1 pcts/ -1.9 pcts/ -3.2 pcts, mainly due to changes in revenue structure and improvement in operational efficiency due to the impressive growth rate of the high-margin business, and with the further improvement of the company's commercialization efficiency, the gross margin still has room for further improvement. The company has been adjusted The break-even inflection point of operating profit is imminent.
The advertising business is growing rapidly, and effective advertising has performed well. The company's 2024Q1 advertising revenue was 1.67 billion, yoy +31%. The company continued to improve advertising monetization efficiency through a number of measures, including improving ad inventory (broadening dynamic, search, etc.), opening up fireworks and advertising systems, improving infrastructure construction (improving algorithm efficiency, etc.), and providing vertical industry solutions for core advertiser industries such as games, digital appliances, and e-commerce platforms. Currently, the company still has a lot of room for improvement in ad load, etc., and future advertising business growth can be expected.
User growth & improved content ecosystem, continued enrichment of value-added services. 2024Q1 Bilibili DAU and MAU reached 102 million/342 million, yoy +9.3%/8.3% respectively. The average daily user time reached 105 minutes, and the broadcast volume of automotive, home improvement, parent-child, and AI content achieved the same significant increase. With the continuous increase in the number of users and the improvement of the content ecosystem, value-added services continued to be rich, including live streaming, conference members, paid classes, charging, community decoration, etc., which also drove the company's 2024Q1 value-added service revenue to 2,529 million yuan, yoy +17.3%.
The performance of old games is steady, and the Q2 new game product line is rich. The company's game business is gradually recovering its performance after adjustments. On the one hand, thanks to good long-term operation, the old games “FGO” and “Blue Line” once again entered the top ten iOS bestsellers in Q2. On the other hand, the company's new Q2 product line is rich. “Wuhua Mi Xin” was launched in April, and the SLG game “Three Kingdoms: Designing the World” has also been scheduled for June 13. Currently, the company will continue to deepen its game business, and self-developed products are worth looking forward to.
Investment advice: We continue to be optimistic about the company's subsequent growth and improvement in profit improvement capabilities. We expect the company to achieve operating income of 253.81/282.32/30351 billion yuan in 2024-2026, up 13%/11%/8% year-on-year, and achieve adjusted net profit of -4.76/9.87/1.75 billion yuan, corresponding to PE -/42x/23x, maintaining a “buy” rating.
Risk warning: policy risk, user growth falls short of expectations, commercialization process falls short of expectations