Bilibili's proxy mobile game “Three Kingdoms: Determining the World” reached the top of the iOS bestseller list after its launch, and is expected to drive game revenue growth throughout the year. GMV delivery increased significantly year-on-year during Station B's 618 period, and the platform's monetization capacity continued to improve. We raised our profit forecast for Bilibili and maintained our buy rating.
Key points to support ratings
The new agent game has been online for more than a week, and the sales ranking has stabilized in the TOP5. On June 13, Bilibili began an open beta for the SLG mobile game “Three Kingdoms: Determining the World”. According to Qimai data, the product reached the top 3 in the iOS bestseller list after launch. As of June 24, the ranking remained in the top 5 for 10 days after launch. The company's 23Q2/Q3/Q4 mobile game revenue was 891/9.92/1,007 million yuan respectively, which is a low base. We expect “Samou” to contribute more to the company's game revenue throughout 2024.
Lightweight innovation in the SLG category is expected to maintain long-term stable operation. According to the game teahouse, the developer of “Three Kingdoms: Determining the World” is Dongfeng Studio, and Bilibili holds 10% of the studio's shares.
Its main Three Kingdom-themed SLG competitor “Three Kingdoms: Strategic Edition” has basically stabilized at 10 in the best-selling list. Currently, it has declined to around 15, while NetEase's “Lead Tsuchihama” ranking has basically remained around 20. We believe that this product reduces krypton, liver, and load over the original traditional SLG, so as to focus on the fun part of the gameplay. In terms of kicketing, the average drawing price and development costs have been significantly reduced, more emphasis is placed on strategy rather than player kryption, and the overall experience for civilian players is more guaranteed. The operation of the game has been partially simplified, and the overall weight is lighter, lowering the threshold and improving the player experience while reducing the burden on users. We believe that the game has undergone comprehensive optimization on the original system and innovation in the payment system, and is expected to maintain long-term stable operation after initial outstanding performance.
During the 618 period, there was a significant year-on-year increase in GMV delivery, and monetization capacity increased. According to Bilibili Business News, GMV delivered goods during Bilibili 618 was +146% year-on-year. Among them, the apparel and accessories category grew 382% year over year, and total order volume increased 154% year over year. Among them, orders for products over 1,000 yuan were +136% year-on-year.
During the 618 period, advertising revenue from delivery was +93%, with the e-commerce platform industry growing at a year-on-year rate of 1346%; the number of customers advertising on Station B was +313%, bringing more than 50% of new customers to the entire industry; the number of UP players participating in delivery was +143%, the number of delivery videos was +359% year-on-year, and the number of live streaming delivery sessions was +141% year-on-year. We believe that the final report of Bilibili 618 shows the potential that the platform can explore in the delivery field. It is expected that as it continues to build user mentality and gradually cultivate users' consumption habits, the platform's monetization capacity will continue to improve.
valuations
We believe that the performance of Bilibili's agent for new games is impressive, which is expected to drive game revenue growth throughout 2024; the GMV delivered by the platform increased significantly year-on-year during the 618 period, showing the platform's monetization potential, and will also contribute to the increase in 24Q2 advertising revenue. We raised 2024/25/26 revenue to 261.81/295.88/32,737 billion yuan, and non-GAAP net profit was -4.65/12.50/19.59 billion yuan, corresponding to 2025/26 PE of 50.6/32.3 times, maintaining a “buy” rating.
The main risks faced by ratings
Macroeconomic growth has slowed; newcomers have fallen short of expectations; policy supervision has become stricter; user stickiness has declined.