26 August 2025 | 2:26AM HKT Bilibili Inc. (BILI) Buy 2Q25 review and NDR takeaways: stronger ads momentum, 2 banhao approvals improve game visibility; Buy | BILI | 12m Price Target: $26.30 | Price: $23.98 | Upside: 9.7% | | --- | --- | --- | --- | | 9626.HK | 12m Price Target: HK$205.00 | Price: HK$186.70 | Upside: 9.8% | We maintain Buy rating and refresh our estimates post Bili's 2Q25 result/NDR meeting with mgmt. We remain constructive on the name considering its ads growth profile is one of the fastest ...

Core Insights - The article highlights the significant growth and competition in the shooting game genre, particularly in the mobile gaming sector, with major players like Tencent and NetEase actively expanding their portfolios [1][2][7]. Group 1: User Engagement and Market Dynamics - On June 5, the active user count for "Peace Elite" surpassed 37 million, indicating strong engagement in the shooting game segment [1]. - The National Press and Publication Administration approved 147 domestic and 11 imported games, including several shooting titles, reflecting a robust market for this genre [1]. - The shooting genre accounted for 13.89% of the top 100 mobile games by revenue last year, ranking third, showcasing its significant market share [2]. Group 2: Revenue and Profitability Insights - Despite a focus on user metrics like DAU (Daily Active Users) and MAU (Monthly Active Users), the revenue potential of shooting games, especially on PC, is substantial, as indicated by Tencent's comments on "Delta Force" [2][7]. - In 2024, the tactical multiplayer genre is projected to lead mobile game revenues at 17.99%, followed closely by role-playing games at 17.85% and shooting games at 13.89% [2]. Group 3: Competitive Landscape - The shooting game market is characterized by intense competition among Chinese developers, who are not only competing internally but also vying for market share against established Western companies [9]. - Emerging markets like Russia, Turkey, and Brazil are showing explosive growth in active users for shooting games, indicating a shift in global gaming dynamics [9]. Group 4: Innovation and Long-term Viability - The shooting genre continues to evolve with innovative gameplay, such as the integration of tactical elements and various modes, which keeps the genre fresh and engaging for players [10][12]. - The ability of shooting games to incorporate diverse gameplay elements without alienating core players suggests a strong potential for long-term engagement and revenue generation [13].

Core Insights - The National Press and Publication Administration issued approval for 144 game titles in May 2025, including 130 domestic and 14 imported games [1] - Notable games receiving approval include Perfect World's "Yihuan" and NetEase's "Destiny: Stars" [1][4] - Perfect World's "Yihuan" has gained significant attention, with over 10 million views on Bilibili and 2.48 million reservations on TapTap [1][4] Group 1: Domestic Games - A total of 130 domestic games received approval, with key products from listed companies such as Shanghai Shulong's "Dragon Valley: Remake" and Baidu's "Greedy Snake Battle 2" [1] - Perfect World's "Yihuan" is highlighted as a potential turnaround product for the company, being the first urban supernatural open-world RPG in China [4] - The game's recruitment video has surpassed 5 million views, indicating strong interest [4] Group 2: Imported Games - 14 imported games were approved, including NetEase's "Destiny: Stars," which is the first mobile game based on the Bungie IP [4] - "Destiny: Stars" retains the series' world view and includes classic gameplay elements along with new features like Rogue mode [4] - Other notable imported titles include "Rainbow Island: Adventure" and "Eternal Tree Song: Genesis" from listed companies [4] Group 3: Changes in Game Approvals - Tencent's "Yuanmeng Star" received a new client version approval, while Blizzard's "Diablo II" had its operational unit changed, indicating a potential reconciliation between NetEase and Blizzard [5][8] - The approval for "Diablo II" marks a significant milestone for the classic ARPG, which has sold over 15 million copies globally since its release in 2000 [8]

Group 1 - The National Press and Publication Administration issued 130 domestic game approvals in May 2025, with a notable increase in monthly approvals, reaching a new high this month [1][3] - Among the approved domestic games, 76 are mobile games, 54 are mobile-casual puzzle games, 6 are client games, and 1 is for the PS5 console, with some games receiving multiple platform approvals [1][5] - A total of 610 domestic game approvals have been issued this year, indicating a continuous upward trend in the approval rate [1][3] Group 2 - The number of imported game approvals has shifted from bi-monthly to monthly, with a consistent increase in the number of approvals each month [3] - In the latest batch of imported game approvals, 14 mobile games were granted licenses, with some receiving approvals for multiple platforms [1][5] - Notable titles among the newly approved games include Tencent's "Secret Realm Knife Boy," Perfect World's "Different Ring," and NetEase's "Fate: Stars" [5][15]

Group 1 - In May, the National Press and Publication Administration approved 130 domestic online games, including titles from Perfect World and Kaixin Network [1][2] - Among the approved games, 70 are mobile games, 54 are mobile-casual puzzle games, 5 are mobile + client games, and 1 is a tri-platform game [1] - 14 imported online games were also approved, including Blizzard's "Diablo II" which is set to launch in the Chinese market [1][4] Group 2 - Perfect World's "Yihuan," a three-platform game, received approval and is an open-world RPG developed on the Unreal Engine 5, generating significant interest with over 5 million views during its promotional phase [2] - The game has been compared to "GTA" due to its impressive graphics and is seen as a potential turnaround project for Perfect World [2] - Tencent's "Yuanmeng Zhi Xing" has added a client version, expanding its platform availability [7]

Industry Developments - The Chinese government has introduced multiple favorable policies for the gaming industry, including support for game exports and the establishment of a "Game Art Design" undergraduate program [1][4][5] - The National Press and Publication Administration approved 127 new game licenses in April, with 118 being domestic games [1][6] Company Updates - Gigabit reported Q1 2025 revenue of 1.136 billion yuan, a year-on-year increase of 22.47%, and a net profit of 283 million yuan, up 11.82% [1][8] - Giant Network's 2024 net profit grew by 31.15%, with stable operations and significant growth in mini-game business [1][11] - Iceberg Network reported a net loss of 247 million yuan in 2024, a decline of approximately 190%, primarily due to high overseas marketing costs [1][9][10] - Perfect World experienced a 28.5% revenue decline in 2024 but rebounded in Q1 2025 with a revenue increase of 52.22% [1][12] - Youzu Network's 2024 revenue fell by 11.75%, but Q1 2025 showed a revenue increase of 7.29% [1][13] - Tencent announced 46 game updates at the SPARK 2025 conference, including 24 new games [1][14] - Ru Yi Jing Xiu partnered with NBA China to develop two mobile games, expanding into the sports gaming sector [1][15] - NetEase's global investment and cooperation president Simon Zhu announced his departure, with Li Riqiang taking over [1][16]

Investment Rating - The investment rating for the company is "Buy" and is maintained [9] Core Views - The company achieved revenue of 1.136 billion yuan in Q1 2025, representing a year-on-year increase of 22.47% and a quarter-on-quarter increase of 29.44%. The net profit attributable to shareholders was 283 million yuan, up 11.82% year-on-year, while the net profit excluding non-recurring items was 275 million yuan, up 38.71% year-on-year. This marks the first quarter of positive revenue growth since 2023 [2][4] - The new game "Wen Jian Chang Sheng" contributed over 360 million yuan in revenue increment, with other core products like "Wen Dao" and "Yi Nian Xiao Yao" also showing quarter-on-quarter revenue growth. The report emphasizes the importance of monitoring the revenue trends of core products and the progress of new game launches [5][7] Summary by Sections Financial Performance - In Q1 2025, the company reported a revenue of 1.136 billion yuan, a year-on-year increase of 22.47% and a quarter-on-quarter increase of 29.44%. The net profit attributable to shareholders was 283 million yuan, reflecting an 11.82% year-on-year increase, while the net profit excluding non-recurring items was 275 million yuan, up 38.71% year-on-year [2][4] - The company’s revenue returned to positive growth for the first time in 2023 [4] Game Performance - The new game "Wen Jian Chang Sheng" significantly contributed to revenue, generating 363 million yuan in Q1 2025. The revenue from "Wen Dao" was 321 million yuan, down 16.3% year-on-year but up 34.9% quarter-on-quarter. "Wen Dao Mobile" generated 441 million yuan, down 15.9% year-on-year and down 4.3% quarter-on-quarter [5][6] - The report highlights the need to focus on the revenue trends of core products and the testing and launch schedules of new games [7] Investment and Expenses - The company increased its marketing expenses due to the launch of "Wen Jian Chang Sheng," with sales expenses rising to 360 million yuan, an increase of 66 million yuan year-on-year and 165 million yuan quarter-on-quarter. The sales expense ratio increased by 9.5 percentage points to 31.7% [6] - The report notes that the overall investment return on marketing spending remains good, with stable year-on-year sales expense ratios [6]