Video industry: a fast-growing national track

The world has entered the video age. Because of lower consumption and production threshold and richer and vivid content presentation, video content has become a larger media form than text and picture users.By the end of 2020, the number of video users has reached 927 million, and the average daily time spent on video content has reached 2.55 hours, exceeding that of other media types.。

According to the duration of a single video, the video industry can be intuitively divided into three categories: short video, medium video and long video.

Short videoGenerally, the duration is 15 seconds, mainly with interesting and powerful content, usually UGC4 or PUGC5 videos, mainly realized by live broadcast of advertisements, and Douyin and Kuaishou Technology on behalf of the company.

Medium video: generally, the time is 3-10 minutes, and the content is more well-produced and useful, usually PUGC video, with advertising as the main way to pay members as a supplement, representing the company as Bilibili Inc., watermelon video and Youtube

Long videoGenerally, the time is about 40 minutes, with the best content production, mainly movies and TV dramas, usually OGC6 videos, supplemented by paid member ads, and iQIYI, Inc. and Tencent videos on behalf of the company.

Figure 1 comparison of the three major video industries: short video, medium video, and long video

Bilibili Inc. business: users and content "break the circle", the community atmosphere is not reduced.

• Bilibili Inc. is a unique and scarce PUGC video community.

Bilibili Inc. is a video community with a strong community atmosphere based on PUGC (content created by professional users) video. Different from short videos, PUGC video has a high threshold for creation and richer video content.Bilibili Inc. is the leader in PUGC video industry.。

meanwhile,Bilibili Inc.Owning a clubThe products in the zone have high creative penetration and high interaction rate.，Unique barrage culture和A good communityThe atmosphere inspires users to actively create and interact. In Bilibili Inc., 7.7 million videos are uploaded by 2.2 million creators every month, generating 6.6 billion interactions.

Chart 2 Bilibili Inc. community activity remains high

• Firmly occupy the minds of young people, constantly "break the circle", the scale of 400 million users is expected

86% of the 223 million monthly active users of 21Q1Magi B station as of 21Q1BJGeneration Z +, 50% live in first-and second-tier citiesBilibili Inc. also relies on a deep understanding of young people, continues to create and operate content that young people are interested in, and is deeply loved by young people, forming a unique brand and commercial value.

Chart 3 Bilibili Inc. accounts for 79% of young users under the age of 24.

At present, the proportion of Bilibili Inc. 's Generation Z users is 84.2%. Assuming that with the success of breaking the circle, the age level will be more balanced, and the proportion of Generation Z users will drop to 50% (both Douyin and Weibo Corp's Generation Z users will account for about 51% of the total users).The total user scale of Bilibili Inc. can reach 465 million.。

• The development of commercialization is accelerated, the industrialization of vertical population and the scale of generalization of population

Bilibili Inc. 's operating income reached 12 billion yuan in 2020, an increase of 77% over the same period last year and an accelerated growth over 2019.

Bilibili Inc. 's commercialization is mainly divided into two categories:

1) based onVertical crowdCommercialization, includingGames, value-added services (live streaming, paid members), e-commerceIn 2020, revenue accounted for 40%, 32% and 13%, respectively.

2) based onGeneralized populationCommercialization, that isAdvertising, accounting for 15% of revenue.

For the vertical group, Bilibili Inc. adopts the way of deep industrialization to provide more professional content services for the vertical group such as ACG. For the general population, Bilibili Inc. continues to break the circle by constantly expanding the content category. In the future, as the user scale of Bilibili Inc. continues to increase, it is expected that the proportion of advertising revenue will continue to increase.

Figure 4 Bilibili Inc. 's income structure

Investment suggestion

Bilibili Inc. monopolizes the PUGC golden track and Generation Z + golden crowd, with rapid revenue growth and high single-user value.

Based on the fast-growing revenue capacity, using the single-user valuation method based on user value, Ping an Securities gives Bilibili Inc. a target market value of 342.5 billion yuan (about HK $412.6 billion), corresponding to the average value of the two methods.Target price of HK $1075 per share。

The first coverage was given to Bilibili Inc."highly recommended"Rating.

Risk hint

The risk of slowing down user growth, desalination of community atmosphere, and content regulation risk.