Summary of Bilibili's Conference Call Company Overview - The conference call focuses on Bilibili's gaming business, which has evolved through four distinct phases from reliance on agency games to self-developed titles and optimization strategies, culminating in record revenue from "Three Kingdoms: Strategy" [2][3]. Key Points and Arguments Gaming Business Evolution - Bilibili's gaming business has transitioned through four phases: 1. **2016-2019**: Rapid revenue growth through agency games like "FGO" and "Azur Lane," with revenue increasing from less than 500 million to 3.5 billion, accounting for over 80% of total revenue by 2019 [3]. 2. **2019-2021**: Shift towards self-development, investing in nearly 20 game companies, but faced challenges with unsuccessful projects [3]. 3. **2022-2023**: Major optimization phase, including leadership changes and strategic adjustments [3]. 4. **2024-Present**: Achieved record revenue of 5.6 billion from "Three Kingdoms: Strategy," a 40% year-on-year increase [2][3]. Future Product Expectations - Upcoming key products include "Three Kingdoms: Card" (testing on October 30) and the successful single-player game "Escape from Yakov," which sold 500,000 copies in four days, with potential sales reaching 1-2 million [2][6][8]. Revenue Projections - "Three Kingdoms: Card" is expected to generate annual revenue between 1-3 billion, with a central estimate of around 2 billion. If successful, Bilibili's gaming revenue could reach 7.3 billion in 2026, a 14% increase year-on-year [4][13]. Strategic Changes - Key strategic changes include: 1. Focusing on creative leadership and exclusive agency rather than deep self-development [5]. 2. Expanding game categories to include SLG, card games, and independent titles [5]. 3. Emphasizing small team productions for efficiency [5]. 4. Utilizing platform value for effective marketing through community engagement [5]. Market Positioning - Bilibili aims to differentiate "Three Kingdoms: Card" from competitors like Giant Network by targeting a broader user base with lower user acquisition costs and a focus on younger audiences [12][13]. Financial Outlook - The financial outlook suggests that if "Three Kingdoms: Card" performs well, Bilibili's gaming revenue could significantly boost overall company performance, with potential net profits reaching 3.5 billion to 3.8 billion by 2026 [4][14]. Investment Potential - Based on projections, Bilibili's target market value could reach 123.6 billion to 150 billion RMB, indicating a potential stock price increase of 40% to 78% from current levels [14]. Additional Important Insights - "Escape from Yakov" is designed as a single-player PVE game with a unique top-down perspective, making it more accessible to players who may struggle with traditional first-person gameplay [8][9]. - The game has significant growth potential if it can expand into online and mobile formats, which would require additional resources and support from Bilibili [9]. - The competitive landscape for "Three Kingdoms: Card" is shaped by the existing popularity of "Three Kingdoms Kill," which has a substantial market presence [11][12]. This comprehensive analysis highlights Bilibili's strategic shifts, product expectations, and financial projections, indicating a positive outlook for the company's gaming business and overall market position.

Core Viewpoint - Huatai Securities initiates coverage on Bilibili's Hong Kong stock with a "Buy" rating and a target price of HKD 316.5, corresponding to a 25E PS of 4.1x, highlighting the company's unique position as a mid-video community platform with a solid ecosystem and robust user retention [1][2]. Group 1: Community and User Engagement - Bilibili has evolved from a niche ACG community to a comprehensive video ecosystem over 15 years, establishing a competitive moat through its unique community atmosphere and closed-loop ecosystem [1]. - The platform primarily attracts a young demographic, with over 80% of users under 35 years old, showcasing high user retention rates, including over 80% for formal members and more than 84% for users with over ten years on the platform [1]. Group 2: Advertising Business - The advertising segment has transitioned from an exploratory phase to systematic and scalable growth, with an expected overall revenue growth of 27.7% in 2024, driven by a 40% increase in performance advertising [1]. - The completion of the advertising infrastructure and the integration of AI technology have significantly enhanced advertising efficiency, with a projected 10% year-on-year increase in eCPM for the first half of 2025 [1]. Group 3: Gaming Business - The gaming segment has shown a strong recovery, with revenues reaching CNY 5.6 billion in 2024, a 40% year-on-year increase, largely due to the successful launch of the new game "Three Kingdoms: Strategy Determination" [2]. - The strategy focuses on long-term operation and youth-oriented game categories, with both self-developed and exclusive agency games contributing to revenue growth [2]. Group 4: Market Perspective and Valuation - The market tends to focus on valuation and growth certainty, but the company’s community advantages and high active user growth remain underappreciated [2]. - Revenue projections for 2025-2027 are CNY 30.03 billion, CNY 32.72 billion, and CNY 35.09 billion, with adjusted net profits expected to be CNY 2.31 billion, CNY 3.18 billion, and CNY 3.99 billion respectively [2].

Investment Rating - The report initiates coverage on Bilibili (9626 HK) with a "Buy" rating and a target price of HKD 316.5, corresponding to a 2025E PS of 4.1x [1][7]. Core Insights - Bilibili has evolved from a niche community to a comprehensive video ecosystem, establishing a strong competitive moat through its unique community atmosphere and high user retention [2][18]. - The advertising business has transitioned into a systematic growth phase, with a projected revenue increase of 27.7% year-on-year in 2024, driven by a 40% growth in performance advertising [3][19]. - The gaming segment has shown robust recovery, with revenues reaching RMB 5.6 billion in 2024, a 40% year-on-year increase, supported by the successful launch of new games [4][22]. - The company is expected to achieve significant profit growth, with adjusted net profits projected at RMB 2.31 billion, RMB 3.18 billion, and RMB 3.99 billion for 2025-2027 [6][20]. Summary by Sections Community Ecosystem - Bilibili's community has a high retention rate, with over 80% for formal members and 84% for users registered for over ten years, indicating a deep user-platform bond [2][21]. - The platform's user base is predominantly young, with over 80% of users under 35 years old, showcasing a strong generational engagement [2][21]. Advertising Business - The advertising infrastructure has been fully established, enabling comprehensive coverage across various platforms, including long and short videos, PC, and search [3][19]. - AI technology integration is enhancing advertising efficiency, with a 10% year-on-year increase in eCPM in the first half of 2025 [3][19]. Gaming Business - The gaming revenue for 2024 is expected to reach RMB 5.6 billion, with a 40% year-on-year growth, driven by the successful launch of new titles [4][22]. - The strategy focuses on long-term operations and the introduction of younger game genres, with the upcoming release of "Three Kingdoms: Hundred Generals Card" expected to continue this trend [4][22]. Financial Performance - Revenue projections for 2025-2027 are RMB 30.03 billion, RMB 32.72 billion, and RMB 35.09 billion, respectively, with adjusted net profits expected to rise significantly [6][20]. - The overall gross margin is anticipated to improve from 17.6% in 2019 to 32.7% in 2024, driven by a higher proportion of high-margin advertising and gaming revenues [20].

Core Insights - The mobile game "Dudu Face Prank," developed by the Korean team Epid GAMES and published by Bilibili outside of Korea, launched internationally on October 9 and has achieved significant early success in various markets [1][2]. Market Overview - As of October 13, "Dudu Face Prank" ranks first on the iOS free charts in Hong Kong, Macau, and Taiwan, and second in Japan [3]. - The game accumulated over 320,000 downloads across both platforms within two days of its launch [5]. - Revenue generated in the first two days exceeded 2.16 million, excluding platform fees [6]. Game Features and Design - The game offers a "super-saturated welfare" system, providing players with 130 free draws upon login and a total of 300 draws in the first week, significantly more than typical offerings in the genre [8]. - Unique gameplay features include real-time interactive character customization using Live2D technology, enhancing user engagement through playful interactions [10]. - The game is designed for "casual play," with daily tasks taking only 15-20 minutes to complete, catering to players' fragmented time availability [10]. Marketing Strategy - The marketing campaign began in early September, with increased efforts on the launch day [12]. - Promotional materials focus on the game's core selling points: character interaction, high welfare offerings, and a cute aesthetic [14][20]. - The marketing approach emphasizes low-cost strategies, utilizing smaller influencers and social media platforms to maintain a balanced ROI [26]. Bilibili's Strategic Shift - Bilibili's decision to publish "Dudu Face Prank" reflects a strategic pivot from heavy-duty games to lighter, more casual offerings, addressing the growing demand for low-pressure gaming experiences [28]. - The game fills a gap in Bilibili's portfolio for lightweight games, complementing its existing heavy-duty titles [28]. - The potential for success in the Chinese market is promising, given the game's appeal to Bilibili's large user base and its compatibility with the platform's community-driven content [29].

Market Overview - The total revenue from in-app purchases (IAP) in the Japanese mobile gaming market is projected to be $11 billion (approximately 78.2 billion RMB) from August 2024 to July 2025, reflecting a year-on-year decline of 2.2% [1] - Despite a slight market contraction and a 2.5% decrease in downloads, the market remains stable due to a high average revenue per user (ARPU) and effective monetization strategies, maintaining annual revenue above 1.6 trillion yen (approximately 77.2 billion RMB) since 2021 [1] Category Performance - RPG games continue to dominate the Japanese mobile gaming market, contributing 37.4% of total revenue, with titles like "Uma Musume," "Monster Strike," and "FGO" leading the revenue charts [3] - Strategy games rank second with a 21.8% revenue contribution, driven by 4X strategy games like "Last War: Survival" and "Whiteout Survival," which saw a 35% revenue increase, and the card battle game "Pokémon TCG Pocket," which achieved a 305% revenue surge [5] - Casual puzzle games are the primary drivers of download volume, accounting for 33.2% of total downloads, with games like "Car Jam" and "Screw Sort 3D" experiencing over 70% year-on-year growth in downloads [5] IP Importance - Local IPs play a crucial role in the Japanese gaming market, with the "Pokémon" IP achieving a 32% year-on-year revenue increase due to the success of "Pokémon TCG Pocket" [10] - The "Gundam" IP, through the new release "SD Gundam GGENERATION ETERNAL," saw over 800% year-on-year growth, highlighting the effective operational strategies that enhance IP value [10][12] Publisher Landscape - Japanese publishers dominate the market, contributing over 52% of total IAP revenue while accounting for only 31% of downloads [14] - Major Japanese companies like Bandai Namco, Sega, and Capcom rank among the top ten global publishers on Steam, indicating strong influence in the PC and console gaming markets [14] - Overseas publishers adopt differentiated strategies to penetrate the Japanese market, focusing on core paying users and launching casual games that appeal to a broader audience [16][18] Advertising Strategies - The gaming sector is a leading category for digital advertising in Japan, with significant ad spending and display volume [19] - LINE is the most prominent channel for game advertising, with successful campaigns often aligning with major in-game events [19][20] - Targeted advertising strategies are employed, such as "Whiteout Survival," which focuses on male users aged 25-34, utilizing platforms like TikTok and Instagram to resonate with younger audiences [22]

Core Viewpoint - The article discusses the challenges faced by the game "Black Beacon" and the broader implications for the mobile gaming industry, particularly in the context of a declining market and the difficulties of new game development. Group 1: Company Challenges - "Black Beacon" has faced significant delays in version updates, with the latest announcement pushing the end of version 1.2 to October 14, a delay of 50 days [3] - The company has experienced a relocation of its headquarters, which has led to speculation about potential downsizing and operational difficulties [4] - Technical challenges have hindered the development of "Black Beacon," with reports indicating that the dual perspective design and complex gameplay mechanics have extended the development cycle by 30% [8][9] Group 2: Market Conditions - The mobile gaming market has seen a decline, with a reported 8% drop in actual sales revenue in the first half of 2025 compared to the previous year [12] - The number of new games in the mobile gaming sector has decreased by nearly 40% from peak levels, indicating a stagnation in innovation and new product launches [14] - The market is characterized by a "frozen" state, where older games maintain player engagement through continuous updates, while new games struggle to gain traction due to high technical demands and market pressures [15][17] Group 3: Industry Trends - The article highlights a growing divide between large developers and smaller teams, with larger companies taking on the responsibility for innovation, which may lead to a concentration of resources and potential stagnation in creativity [21] - There is a notable trend of nostalgia among players, with older games like "FGO" and "Arknights" continuing to perform well, while new titles face challenges in capturing player interest [15][17] - The industry is witnessing a restructuring, with opportunities for smaller teams to find niches in the market, despite the overall competitive landscape becoming more intense [21]

Core Insights - Bilibili has stabilized its operational rhythm after three months, reporting a significant turnaround in its Q2 2025 financial results with a revenue increase of 20% year-on-year to 7.34 billion yuan and achieving record net profits of 220 million yuan and adjusted net profits of 560 million yuan [1][5][28] Revenue Breakdown - The revenue composition for Q2 2025 is as follows: value-added services (39%), advertising (33%), gaming (22%), and other IP-related products (6%), with gaming's share slightly decreasing by 3% while advertising increased by 4% [6][9] - Value-added services remain the core revenue driver, with a year-on-year growth of 11% to 2.84 billion yuan, and over 80% of users are annual subscribers or auto-renewal users [9][10] User Engagement and Demographics - Monthly Active Users (MAU) increased by 8% year-on-year to 363 million, with a slight decline of 5 million users quarter-on-quarter, indicating improved operational efficiency and user stickiness [4][33] - The average age of Bilibili users has risen to 26, while new users average 22 years old, reflecting a shift in disposable income and consumption patterns [11][12] Advertising Performance - Advertising revenue grew by 20% year-on-year to 2.45 billion yuan, with performance ads seeing nearly 30% growth [12][15] - The top five advertising sectors in Q2 2025 were gaming, digital appliances, e-commerce, online services, and automotive, with gaming contributing significantly to new revenue streams [15][21] Gaming Business Growth - The gaming segment saw a remarkable 60% year-on-year growth, reaching 1.61 billion yuan, driven by popular titles and significant updates [21][25] - The game "Three Kingdoms: Strategy of the World" has been pivotal, achieving record daily active users during its anniversary and is expected to perform well in upcoming markets [26][27] Community and Content Consumption - Daily Active Users (DAU) reached a historical high of 109 million, with a 7% year-on-year increase, and the average daily usage time was 105 minutes, reflecting strong community engagement [33][37] - The platform has evolved from a niche community to a broader content platform, with significant growth in user-generated content across various categories [38] Cost and Profitability - Bilibili's gross profit increased by 46% year-on-year, with gross margin rising from 29.9% to 36.5% [28] - Operating costs grew by 9% to 4.66 billion yuan, with revenue-sharing costs increasing by 19% to 2.97 billion yuan, aligning with revenue growth [39] Future Outlook - Bilibili plans to enhance its advertising capabilities through AI technology, aiming to improve user value and advertising efficiency [18][43] - The company is confident in its long-term gaming strategy, with multiple titles in the pipeline and a commitment to maintaining user engagement over extended periods [30][31]

Group 1: JD Logistics - The company is expected to meet its Q2 performance expectations, with revenue continuing to show double-digit growth and profit increasing in the single digits year-on-year [1] - JD Logistics will provide full-time delivery services for the group's food delivery segment, settling at cost price, which will have limited short-term profit impact but aims for long-term synergy [1] - The target price is set at HKD 18.50, indicating a potential upside of 40.4% from the closing price of HKD 13.18, maintaining a "Buy" rating [1] Group 2: Bilibili - The focus is on enhancing advertising commercialization efficiency and long-term operation of core game IPs [2] - The company aims to strengthen its infrastructure capabilities, leveraging AI to reconstruct recommendation algorithms and improve advertising efficiency across multiple screens and scenarios [2] - The gaming segment is concentrating on long-term operations of core IPs, with new game launches expected to target niche markets and younger demographics [2] Group 3: Battery Industry - In the first half of 2025, China's power battery production and sales were robust, with a total installed capacity of 299.6 GWh, representing a year-on-year increase of 47.3% [4] - Exports of batteries showed a significant year-on-year increase of 56.8%, totaling 127.3 GWh, which accounted for 19.3% of total sales [4] - The overseas market for Chinese battery companies is expanding, with a market share of 43% among the top ten companies, an increase of 7 percentage points year-on-year [5] Group 4: Economic Data - Upcoming economic data releases include the Consumer Price Index (CPI) for June, with expectations of a month-on-month increase of 0.10% and a year-on-year increase of 2.40% [6] - The Industrial Producer Price Index for June is expected to show a year-on-year increase of 0.10% [6] - Retail sales for June are anticipated to decline by 0.90% month-on-month [6]

Investment Rating - The report maintains a "Buy" rating for Bilibili (BILI US) with a target price of $26, representing a potential upside of 21.2% from the current price of $21.46 [6][7]. Core Insights - The report emphasizes Bilibili's focus on enhancing advertising commercialization efficiency and long-term operation of core game IPs. The company aims to expand its advertising ceiling while exploring diversified monetization models primarily targeting C-end users, supplemented by B-end strategies [1]. - Bilibili's advertising strategy involves deepening the value of mid-to-long video content, with a significant increase in advertising revenue from the content consumption and consumer goods sectors, showing a year-on-year growth of 90% and 30% respectively in the first half of the year [1]. - In gaming, Bilibili is concentrating on the long-term operation of core IPs, with successful titles like "Three Kingdoms" achieving record daily active users and maintaining strong revenue contributions from various platforms [1]. Summary by Sections Advertising Strategy - Bilibili is implementing a dual strategy in advertising, focusing on both content quality and market share expansion. The company is leveraging AI to enhance its advertising capabilities, including recommendation systems and intelligent ad placements [1]. - The report highlights that the advertising revenue from the gaming sector is expected to grow as Bilibili assists leading game companies in user retention and marketing budget allocation [1]. Gaming Operations - The report outlines Bilibili's successful game titles, including "Three Kingdoms," which has consistently ranked in the top three of the iOS bestseller list. The company plans to launch new versions and expand its gaming ecosystem [1]. - Upcoming game releases include a new PVE game and expansions for existing titles, indicating a robust pipeline for future growth [1]. Financial Projections - The report projects an adjusted net profit of 2.3 billion RMB for 2025, with expectations for improved gross margins and profit release driven by scale effects and revenue structure optimization [1].

Core Viewpoint - The article discusses the decline of the "second dimension emperor," specifically the game "Million Arthur," which was once a pioneer in the mobile game market but has struggled to maintain relevance in the face of competition and internal challenges [1][2][3]. Group 1: Historical Context and Initial Success - "Million Arthur" was initially successful, generating 300 million in revenue within two weeks of its launch, significantly impacting the domestic gaming market and stock prices [2][3]. - The game experienced rapid decline, with the Japanese version shutting down a year after the Chinese version launched, which eventually also ceased operations in 2016 [3][5]. Group 2: Series of Releases and Decline - The IP saw the release of three additional titles, but none managed to sustain the same level of success, with the latest iterations failing to last even a year [5][7]. - By 2020, the IP was considered to have run its course, with all titles under the "Million Arthur" brand having been discontinued [5][8]. Group 3: Recent Developments and Challenges - A new title, "Million Arthur: Ring," was announced and received a license for the Chinese market, generating initial excitement among fans [8][10]. - However, the game faced significant challenges, including a lack of content updates and a rapid decline in player engagement, leading to its announcement of shutdown in August 2025 [10][11]. Group 4: Internal Issues and Future Uncertainty - The game's poor performance may be linked to recent anti-corruption measures taken by Perfect World, which affected the development team responsible for "Million Arthur: Ring" [13][15]. - The future of the IP remains uncertain, with indications that it may be deprioritized as the company focuses on more successful projects [16].