Bank of America Securities released a report stating that it is expected that bilibili (09626.HK) will disclose its third-quarter performance in mid-November, with the possibility of outperforming expectations in the third quarter and a positive outlook for the fourth quarter.

The bank believes that bilibili's main business trends are progressing well. Driven by the strong performance of the new game 'San Mao,' the group's gaming business is growing well. According to Sensor Tower data, the third-quarter iOS platform revenue has grown 1.2 times year-on-year and 45% quarterly, while 'San Mao' has generated over 0.4 billion RMB in iOS platform revenue (total channels may exceed 1 billion RMB). In addition, from October to date, 'San Mao' has ranked in the top ten to twenty on the game rankings, and it is believed that this will drive revenue growth in the fourth quarter gaming business.

Despite most peers being affected by a weak macro environment, the bank expects bilibili's advertising business momentum to continue in the second half of the year, with a 25% year-on-year growth, mainly driven by strong growth in video e-commerce and gaming advertising. The company has also launched a 3 billion RMB traffic support plan for the november 11 shopping festival, encouraging more content creators to engage in video live streaming. Deep collaboration with Alibaba (09988.HK) and jd.com (09618.HK) will also help increase conversion rates.

In addition, the bank pointed out that bilibili's gross margin structure is shifting towards a high-margin business model, combined with cost optimization. They believe the company can achieve a balanced budget in the third quarter. The bank has raised its earnings per share forecast for 2024 to 2026 by 3% to 14%, with a target price raised from 147 RMB to 176 RMB, equivalent to a forecasted PE ratio of 21 times in 2026 (forecasting the first profitable year next year), reiterating a 'buy' rating.