Zhao Yin Guo Ji·2024-05-24 03:02Investment Rating - Maintain BUY rating with a target price of US$20.50, implying a 49.2% upside from the current price of US$13.74 [4][2]. Core Insights - Bilibili reported a 12% year-over-year increase in total revenue to RMB5.67 billion in 1Q24, aligning with estimates, while adjusted net loss narrowed by 56% year-over-year to RMB456 million, outperforming expectations [2]. - The company remains on track to achieve non-GAAP operating breakeven in 3Q24, supported by gross margin expansion and operational efficiency improvements [2]. - Advertising revenue surged by 31% year-over-year to RMB1.67 billion, driven by strong performance-based ads, with expectations for continued growth [2]. - Value-added services (VAS) revenue grew by 17% year-over-year to RMB2.53 billion, bolstered by live-streaming and innovative services [2]. - Mobile games revenue declined by 13% year-over-year to RMB983 million, but a recovery of 5% year-over-year is anticipated in 2Q24 due to new game launches [2]. Revenue and Profitability Forecasts - Revenue projections for FY24E are set at RMB25.49 billion, with adjusted net loss expected to narrow to RMB710 million [3][7]. - Gross margin is forecasted to improve to 30.0% in FY24E, with operating margin expected to reach -8.1% [7][12]. - Adjusted net profit is projected to turn positive by FY25E, reaching RMB1.16 billion [3][12]. User and Ecosystem Development - Average daily active users (DAUs) increased by 9% year-over-year to 102.4 million, with average daily time spent on the platform rising to 105 minutes [2]. - The e-commerce ecosystem is expanding, with management expecting a 30% year-over-year increase in total e-commerce ad budgets during the 618 shopping festival [2]. Valuation Breakdown - The target price of US$20.50 is derived from a sum-of-the-parts (SOTP) valuation, with contributions from advertising (US$8.5), VAS (US$7.5), and mobile games (US$4.3) [8][9].