Bocom Intl released a research report, raising the revenue forecast for Bilibili (09626.HK) in the third quarter of this year by 1% to 7.3 billion yuan, with a year-on-year increase of 26%, mainly due to the better-than-expected performance of the game 'San Meng'; gross margin increased by 9 and 4 percentage points year-on-year and quarter-on-quarter to 34%, mainly due to the continuous release of operating leverage and the increase in the proportion of game and advertising revenue. In addition, Bocom Intl basically maintained its profit forecast for Bilibili in the third quarter of this year, with adjusted net profit expected to be 0.28 billion yuan.

Bocom Intl mentioned that 'San Meng' ranked second on the iOS game bestseller list, outperforming the bank's previous expectations. Taking into account revenue amortization, the bank adjusted the game revenue for the third quarter and full year of this year to 1.9 billion and 5.6 billion yuan, corresponding to year-on-year growth rates of 92% and 40% respectively, higher than market expectations of 70% and 31% respectively. In addition, its 'Jujutsu Kaisen: Phantom Parade' will be launched overseas within the year, with reservations exceeding 5.15 million as of the 16th of this month, potentially driving growth in overseas game revenue.

Bocom Intl also mentioned being bullish on Bilibili's advertising infrastructure improvement, continuous release of product and technology iteration efficiency, and the expansion of e-commerce transactions driving advertising revenue. Considering the potential for further improvement in its advertising fill rate, the company's advertising revenue is expected to maintain faster growth than the industry average.

Based on the better-than-expected performance of 'San Meng' in revenue and the plan to launch new games, Bocom Intl adjusted Bilibili's total revenue for the 2024 fiscal year, and correspondingly reduced the full-year loss expectation. It also raised the revenue and adjusted net profit expectations for the 2025 fiscal year by 3% and 42% respectively. Furthermore, the stable performance of 'San Meng' boosts long-term operational confidence, and the overseas version and launch of 'Jujutsu Kaisen: Phantom Parade' may enhance overseas brand influence. The continuous increase in the proportion of game and advertising revenue is expected to drive a rise in gross margin, while profit-making capabilities will be unleashed, with normalized profit margins potentially reaching 10% to 15%.

Considering the above factors, Bocom Intl has raised the target price for Bilibili from 155 yuan to 194 yuan, maintaining a 'buy' rating. (js/w)

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