Bank of America Securities released a report stating that bilibili (09626.HK) exceeded expectations in the second quarter performance, and the bank held an investor conference last week. The bank expects the steady trend of the company's gaming and advertising businesses to continue in the second half of the year. Investors are focusing on updates for the 'San Mao' game, the steady trend of the advertising business, and the growth of e-commerce related businesses. In addition, the company's management is confident in its profit trend.
The bank mentioned that the user engagement and feedback for the second season of bilibili's 'San Mao' game are good, and the company will launch the third season at the end of November. The investment return rate for the promotional activities is still on track, and the company will allocate marketing expenses accordingly. The company is confident in the longevity of the 'San Mao' game (compared to similar games like 'Three Kingdoms' which typically have a 6 to 9-year lifespan) and has seen good user engagement and positive tipping behavior from young users through its own channels.
In terms of advertising, the bank mentioned that bilibili's online advertising revenue grew by 30% year-on-year in the second quarter. Despite a weak macroeconomic environment, the bank believes that advertising revenue in the third quarter and the second half of the year can grow by more than 25% year-on-year. Additionally, live streaming and video e-commerce, as the main drivers of advertising growth, have achieved good conversion rates. The gross merchandise value (GMV) in commodity transactions exceeded 10 billion RMB last year, and the GMV during the 618 period this year increased by 1.46 times year-on-year.
The bank expects that with the stable trends in the gaming and advertising businesses, bilibili can achieve breakeven in the third quarter. The combination of its gross margin and high-profit business model transformation, as well as cost optimization, will be the key drivers of the company's gross margin expansion. With the stable trends in the key businesses, the bank has raised its earnings forecast for bilibili for the years 2024 to 2026 by 3% to 11%, and increased the target price from 140 yuan to 147 yuan, reiterating a 'buy' rating.