DouYu: Q2 Results Miss And Shareholder Capital Return Draw Attention

Core Viewpoint - DouYu International Holdings Limited's Q2 2024 financial results were disappointing, with a negative short-term outlook due to unfavorable economic conditions in China, although the company has significant cash reserves that may allow for future shareholder returns [2][5]. Financial Performance - DouYu's Q2 2024 revenue decreased by 25.9% year-over-year, falling from RMB 1,392.2 million in Q2 2023 to RMB 1,032.0 million [3]. - The live-streaming segment, which accounts for 76.6% of total revenue, experienced a 37.2% year-over-year decline, with revenue dropping to RMB 790.1 million [4]. - Monthly active users in the live-streaming business decreased by 12.3% year-over-year to 44.1 million, while Average Revenue Per User (ARPU) fell by 25.5% year-over-year to RMB 243 [4]. - DouYu's normalized operating loss widened significantly from RMB 7.5 million in Q2 2023 to RMB 119.6 million in Q2 2024, indicating poor operating leverage due to fixed costs not decreasing in line with revenue [4]. - The company's actual Q2 2024 revenue represented only 23.7% of the full-year consensus forecast of RMB 4,355.1 million [4]. Economic Context - The decline in DouYu's performance is attributed to challenging macroeconomic conditions in China, with import growth slowing from 7.2% in July 2024 to 0.5% in August 2024, and automotive sales contracting for three consecutive months [5]. Shareholder Capital Return Potential - DouYu has cash and cash-like assets totaling RMB 6,561 million (approximately $903 million) as of the end of Q2 2024, suggesting ample capital for shareholder returns [6]. - The company announced a $300 million special dividend and has completed a $20 million buyback plan ahead of schedule, indicating a commitment to returning capital to shareholders [6]. - Management has expressed a determination to provide reasonable returns to shareholders, hinting at the possibility of future share repurchase programs or additional special dividends [6]. Valuation - DouYu's stock is currently valued at 0.40 times the consensus FY 2025 price-to-sales ratio, which is close to its historical three-year mean of 0.42 times [7].