Investment Rating - The report assigns a "Buy" rating for the company [4][18]. Core Views - The game "Three Kingdoms: Strategy of the World," exclusively represented by the company, performed better than expected during its public testing phase, ranking 3rd in the sales chart shortly after launch [1]. - The game's total revenue reached approximately 102 million yuan within the first week, with stable daily revenue around 18 million yuan after the initial launch [2]. - The company has reduced its advertising spending significantly after the initial launch, with a peak in ad placements on the day of the game's public testing [3]. Financial Forecast and Investment Suggestions - The company is projected to generate revenues of 24.73 billion yuan, 28.02 billion yuan, and 30.93 billion yuan for the years 2024, 2025, and 2026 respectively, with net profits expected to improve from a loss of 1.85 billion yuan in 2024 to a profit of 663 million yuan in 2026 [4][10]. - The report indicates a significant increase in net profit growth rates, projecting a 61.6% increase in 2024 and a staggering 372.5% increase in 2026 [15].

Investment Rating - The report maintains a "Buy" rating for Bilibili (BILI US) with a target price of $17.00, indicating a potential upside of 8.2% from the current closing price of $15.71 [8]. Core Insights - Bilibili's first SLG mobile game, "Three Kingdoms: Strategizing the World," has exceeded revenue expectations since its public launch on June 13, 2024, with projected first-month revenue between 500-800 million RMB [1][2]. - The game has achieved a high ranking on the iOS game download and sales charts, indicating strong user acceptance with an App Store rating of 4.4, slightly above competitors [1]. - The report highlights the long-term operational potential of SLG mobile games, suggesting that effective content updates and event operations could sustain revenue growth [2]. Summary by Sections Game Performance - "Three Kingdoms: Strategizing the World" has maintained a top position in the iOS game download rankings and sales charts, with a projected first-month revenue exceeding previous expectations [1]. - Comparatively, other SLG games like Alibaba's "Three Kingdoms Strategy Edition" have achieved a maximum monthly revenue of 1.2 billion RMB, showcasing the competitive landscape [1][3]. Market Strategy - The game differentiates itself by reducing time-consuming operations and enhancing player experience through lower spending requirements, which may attract a broader user base [1]. - Marketing strategies include multi-channel promotions and collaborations with content creators to engage core SLG players [1]. Future Growth Potential - The report anticipates that the new game could open up opportunities in overseas markets, referencing the international success of similar titles [1]. - Revenue contributions from "Three Kingdoms" are expected to accelerate in the second half of the year, potentially increasing overall game revenue by 12-20% in 2024, surpassing market expectations [2].

Investment Rating - The investment rating for the company is "Buy" [3]. Core Insights - The company reported a revenue of 5.665 billion yuan for Q1 2024, representing a year-on-year growth of 11.74%. Gross profit reached 1.605 billion yuan, up 45.42% year-on-year, while net profit was -0.765 billion yuan, compared to -0.630 billion yuan in the same period last year. Adjusted net profit was -0.456 billion yuan, an improvement from -1.031 billion yuan year-on-year [2][3]. - The user ecosystem is steadily improving, with daily active users reaching 102 million, a year-on-year increase of 9.28%. Monthly active users were approximately 342 million, up 8.34% year-on-year. The average user engagement time reached 105 minutes, a historical high [2]. - The advertising business is experiencing rapid growth, with Q1 2024 advertising revenue of 1.669 billion yuan, a year-on-year increase of 31.20%. The revenue from performance-based advertising grew by over 50% [2][3]. Summary by Sections Financial Performance - For Q1 2024, the company achieved a gross margin of 28.34%, an increase of 6.56 percentage points year-on-year, marking seven consecutive quarters of positive growth. The overall operating expense ratio decreased to 42.79%, down 6.10 percentage points from the same period in 2023 [3]. - The company’s revenue forecast for 2024-2026 is projected to be 25.067 billion yuan, 28.273 billion yuan, and 30.134 billion yuan, respectively, with adjusted net profits expected to be -1.554 billion yuan, 0.418 billion yuan, and 1.397 billion yuan [8]. User Engagement - The platform's daily average video views exceeded 5 billion, a year-on-year increase of 22%, and monthly interactions surpassed 16.4 billion, up 15% year-on-year. Over 1.5 million creators earned income, with a more than 50% increase in the number of creators earning through advertising [2]. Business Segments - The value-added services segment generated 2.529 billion yuan in revenue, a year-on-year increase of 17.28%. The advertising segment continues to optimize its products and expand advertising scenarios. The mobile gaming segment saw a revenue decline of 13.15% to 0.983 billion yuan due to the natural decline in older games, but new game launches are expected to boost future revenues [2].

Investment Rating - The report maintains a "Buy" rating for Bilibili (BILI:US) [1][4] Core Views - Bilibili's Q1 2024 revenue reached 5.7 billion RMB, a year-on-year increase of 12%, slightly exceeding consensus expectations, marking a return to double-digit growth since Q4 2022 [2][5] - The adjusted net loss for Q1 2024 was 440 million RMB, better than the expected 500 million RMB, with the loss rate narrowing to 8% [2][3] - User metrics show healthy growth, with MAU reaching 342 million, a year-on-year increase of 8%, and DAU at 102 million, up 9% year-on-year [3] Financial Data and Earnings Forecast - Revenue (in million RMB) is projected as follows: - 2024E: 25,253 - 2025E: 28,139 - 2026E: 31,439 - Year-on-year growth rates are expected to be 12.1% in 2024, 11.4% in 2025, and 11.7% in 2026 [2][4] - Non-GAAP net profit (in million RMB) forecasts are: - 2024E: -415 - 2025E: 1,028 - 2026E: 1,882 - Non-GAAP EPS (in RMB) is expected to improve from -0.98 in 2024 to 4.47 in 2026 [2][4] Business Segments - Advertising revenue for Q1 2024 was 1.7 billion RMB, a year-on-year increase of 31%, driven by product optimization and efficiency improvements [3] - Value-added services revenue reached 2.5 billion RMB, a 17% year-on-year increase, primarily driven by live streaming [3] - Gaming revenue for Q1 2024 was 1 billion RMB, a year-on-year decline of 13%, with new product launches expected to boost performance in Q2 [3] Profitability and Cash Flow - Gross margin improved to 28% in Q1 2024, marking seven consecutive quarters of sequential improvement [3] - Operating cash flow for Q1 2024 was 640 million RMB, achieving positive cash flow for three consecutive quarters [3]

Investment Rating - The report assigns a "Buy" rating for both US and Hong Kong stocks of Bilibili (BILI), with a current price of 13.74 USD / 106.3 HKD and a fair value of 24.75 USD / 193.28 HKD [1][18]. Core Insights - The company reported a total revenue of 56.65 billion RMB for Q1 2024, exceeding consensus expectations and showing a year-over-year growth of 12% [7][9]. - The gross margin improved to 28.3%, up 6.6 percentage points year-over-year, indicating effective cost management and revenue growth strategies [7][13]. - The net loss attributable to shareholders was 7.5 billion RMB, which was better than the expected loss of 8.15 billion RMB, reflecting a significant reduction in losses [7][9]. User Growth and Engagement - In Q1 2024, Daily Active Users (DAU) reached 102.4 million, a year-over-year increase of 9%, while Monthly Active Users (MAU) were 34.2 million, also up 8% [3][4]. - The average daily time spent per user was 105 minutes, marking a new high and a 9% increase year-over-year [3][4]. Revenue Breakdown - Advertising revenue for Q1 2024 was 16.69 billion RMB, up 31% year-over-year, driven by improved product efficiency and healthy overall traffic growth [9][11]. - Live streaming and Value-Added Services (VAS) revenue reached 25.29 billion RMB, a 17% increase year-over-year [9][11]. - Game revenue was 9.83 billion RMB, down 13% year-over-year, primarily due to a lack of new product launches [11][12]. Profitability and Cost Management - The report highlights a strategy focused on increasing gross profit while reducing losses, with operational expenses showing a slight decrease year-over-year [7][15]. - The management expenses were reported at 5.3 billion RMB, down 7% year-over-year, while sales expenses were 9.27 billion RMB [13][15]. Future Projections - The company expects advertising revenue to grow by 30% and 23% in 2024 and 2025, respectively, reaching 83 billion RMB and 102 billion RMB [18][19]. - Total revenue is projected to grow by 14% and 15% in 2024 and 2025, reaching 256 billion RMB and 296 billion RMB [18][19]. - The report anticipates a gradual improvement in profitability, with a forecasted non-GAAP net loss of 12.24 billion RMB in 2024 and a potential profit of 11.29 billion RMB in 2025 [18][19].

Investment Rating - The investment rating for Bilibili-W (9626.HK) is "Buy" and is maintained [5]. Core Insights - Bilibili reported Q1 2024 revenue of 5.665 billion CNY, a year-on-year increase of 12%. Gross profit reached 1.605 billion CNY, up 45% year-on-year, with a gross margin of 28.3%, an increase of 6.5 percentage points compared to the same period last year. The Non-GAAP net loss was 456 million CNY, narrowing by 56% year-on-year. The company achieved positive operating cash flow of 638 million CNY for three consecutive quarters [6][7]. Revenue Analysis - Bilibili's advertising revenue for Q1 2024 was 1.669 billion CNY, a year-on-year growth of 31%. The company has optimized its advertising products and upgraded its effect delivery platform, leading to a more than 50% increase in effect advertising revenue [6][7]. - The revenue from value-added services was 2.529 billion CNY, a 17% increase year-on-year, driven by growth in live streaming and value-added service sales. The number of official members reached 236 million, with a 12-month retention rate of approximately 80% [6][7]. - Game revenue was 983 million CNY, a decline of 13% year-on-year, primarily due to decreased revenue from older games. New game launches are expected to boost future revenue [6][7]. User Engagement Metrics - Daily active users (DAU) grew by 9% year-on-year to 102.4 million, while monthly active users (MAU) increased by 8% to 341.5 million. The average daily usage time reached a historical high of 105 minutes [6][7]. - The average daily video views approached 5 billion, a 22% year-on-year increase, with Story-Mode vertical video views also growing by 22% [6][7]. Profitability Insights - Bilibili's gross profit for Q1 2024 was 1.605 billion CNY, with a gross margin of 28.3%, marking the seventh consecutive quarter of sequential improvement. This was attributed to increased revenue and improved monetization efficiency [7]. - The Non-GAAP net loss narrowed to 456 million CNY, a 56% year-on-year reduction, with operating cash flow turning positive for three consecutive quarters [7]. Earnings Forecast - The company is expected to optimize its commercialization capabilities and operational efficiency, projecting revenues of 25.4 billion CNY and 28.2 billion CNY for 2024 and 2025, respectively, while maintaining a "Buy" rating [7].

Market Overview - Chinese stocks are under scrutiny due to shifting global market dynamics, with higher interest rates expected to divert capital from riskier assets like Chinese stocks [1] - Recent military drills by China near Taiwan have added volatility to the Chinese stock markets amid U.S.-China tensions [1] - Investors are advised to be cautious when selecting Chinese stocks due to an unpredictable regulatory environment and complex geopolitical issues [1] Bilibili (BILI) - Bilibili, known as China's YouTube, has over 300 million monthly users and more than 100 million daily active users [2] - Despite a 20% year-to-date stock increase, the company faces modest growth with a year-over-year revenue growth of only 5.51%, significantly lower than its five-year average of 48% [2] - The company's financial metrics show negative year-over-year net income, EBITDA, and return on equity [2] Bilibili's Q1 Results - In its first-quarter results, Bilibili's mobile gaming segment experienced a 13.1% year-over-year revenue drop, significantly worse than analyst projections of a negative 2.8% [3] - The slowdown in the gaming segment raises concerns as the company aims to streamline operations and reduce less successful projects [3] Nio (NIO) - Nio is struggling in the competitive Chinese EV market, incurring significant losses each quarter without a clear path to profitability [4] - The stock has declined over 42% year-to-date and more than 34% last year, exacerbated by a broader market slowdown [4] - Nio's five-year average top-line growth is 899%, but its year-over-year growth is only 13%, with a negative 38% net income margin [5] iShares MSCI China ETF (MCHI) - The iShares MSCI China ETF is considered a stock to offload, as current bullishness appears to be unfounded in macroeconomic improvements [6] - MCHI is trading near its 52-week high of $44.97, with a year-to-date gain of almost 14%, but its long-term performance has been lackluster [6] - The ETF has an annualized volatility of 25%, significantly higher than the median for all ETFs, and an expense ratio of approximately 0.6%, which exceeds the median by 23% [6][7]

Investment Rating - Maintains a "Buy" rating with an adjusted target price of $16.8 USD / 131 HKD [3][6][7] Core Views - Revenue in 1Q24 reached RMB 5.67 billion, a 12% YoY increase, surpassing market expectations by 1% [3] - Adjusted net loss narrowed to RMB 440 million, better than the market expectation of RMB 500 million, with a 57% YoY improvement [3] - Adjusted loss margin improved by 12.5 percentage points YoY to 7.8% [3] - Daily active users (DAU) grew 9.3% YoY to 100 million, while monthly active users (MAU) reached 342 million, an 8% YoY increase [3] - Advertising revenue grew 31% YoY in 1Q24, with expectations of maintaining a high growth rate of 27% YoY in 2Q24 [3] - Game revenue declined 13% YoY due to the decline of older games, but is expected to recover with the launch of the new game "Three Kingdoms: Strategic World" on June 13 [3] - Gross margin improved to 28.3% in 1Q24, up 6.5 percentage points YoY and 2.2 percentage points QoQ, driven by the optimization of revenue structure [3] - The company aims to achieve adjusted operating profit breakeven in 3Q24 [3] Financial Forecasts - 2024E revenue is forecasted at RMB 24.94 billion, with 2025E revenue expected to reach RMB 27.35 billion [3][4] - Adjusted net loss for 2024E is projected at RMB 395 million, turning to a profit of RMB 984 million in 2025E [4] - Target P/S ratio for 2024E is 2.0x, with a slight decline to 1.8x in 2025E [4] User Metrics and Advertising - Average daily usage time reached a record high of 105 minutes in 1Q24 [3] - Advertising growth is supported by increased traffic, expanded ad inventory, and improved e-commerce ecosystem [3] Game Business Outlook - Game revenue is expected to return to positive growth in 2Q24 with the launch of the new game "Three Kingdoms: Strategic World" [3] Valuation and Target Price - The target price is based on a 2024E P/S ratio of 2.0x, reflecting confidence in the company's steady traffic growth and improving advertising ecosystem [3][6][7] Industry Context - The report covers the internet industry, with a focus on companies like Bilibili, Tencent, and NetEase, highlighting their performance in gaming and advertising sectors [16]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company reported a strong performance in advertising growth, with a notable focus on the upcoming game "Three Kingdoms: Strategizing the World" set to launch in June [1][2] - The Q1 2024 financial results showed a revenue of 5.7 billion RMB, representing a year-over-year increase of 12% but a quarter-over-quarter decrease of 11% [2] - The adjusted net profit for Q1 2024 was a loss of 440 million RMB, significantly narrowing compared to the previous year [2] Financial Performance - The company's Q1 2024 revenue breakdown includes: - Mobile gaming revenue of 983 million RMB, down 13% year-over-year - Value-added services revenue of 2.529 billion RMB, up 17% year-over-year - Advertising revenue of 1.669 billion RMB, up 31% year-over-year - IP derivatives and other business revenue of 484 million RMB, down 5% year-over-year [4][6] - The overall gross margin improved to 28.3%, an increase of 6.6 percentage points year-over-year [4] - The monthly active users (MAU) grew by 8% year-over-year to 341.5 million, while daily active users (DAU) increased by 9% to 102 million [4][6] Future Projections - Revenue forecasts for FY2024-2026 are projected at 25.9 billion, 29.5 billion, and 33.6 billion RMB respectively, with a non-GAAP net profit forecast of -360 million, 1.57 billion, and 2.41 billion RMB [5][7] - The target price for 2024 is set at 129 RMB or 142 HKD, with a valuation based on MAU and price-to-sales ratios [4][7]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Insights - The company achieved revenue of 5.7 billion yuan in Q1 2024, representing a year-over-year increase of 12% and a quarter-over-quarter decrease of 11%, with adjusted net loss narrowing to 456 million yuan, a 56% improvement compared to the same period last year [2][3] - The advertising business continues to show strong growth, with Q1 2024 revenue of 1.669 billion yuan, up 31% year-over-year, driven by optimized advertising products and improved efficiency [3] - The gaming business faced temporary pressure with Q1 2024 revenue of 983 million yuan, down 13% year-over-year, primarily due to the absence of new game launches [3] - The gross margin improved to 28.3%, up 6.6 percentage points year-over-year, indicating ongoing cost reduction and efficiency enhancement efforts [3] Summary by Sections Revenue and Profitability - Total revenue for 2024 is projected to be 21.899 billion yuan, with a year-over-year growth of 12% [2] - Non-GAAP net profit is expected to improve significantly from a loss of 4.822 billion yuan in 2023 to a loss of 1.726 billion yuan in 2024, and turning positive in 2025 with a profit of 274 million yuan [2][4] Business Segments - Advertising revenue is expected to continue growing due to seasonal events and improved product integration [3] - The gaming segment is anticipated to recover with new game launches, including "物华弥新" and "三国：谋定天下" [3] Financial Metrics - The company maintains a target of turning adjusted operating profit positive by Q3 2024, supported by improved operational efficiency [3][4] - The projected price-to-sales ratio for 2024 is 1.68, indicating a favorable valuation relative to expected revenue growth [4]