Investment Rating - The report maintains a "Recommended" rating for Bilibili (BILI) [1] Core Views - The company's Q2 2025 financial results exceeded expectations, with total revenue reaching 7.34 billion yuan, a year-over-year increase of 20%, aligning with Bloomberg consensus [1] - The adjusted net profit attributable to shareholders was 560 million yuan, marking a return to profitability and surpassing Bloomberg consensus by 8% [1] Financial Summary - **Revenue Forecasts**: - 2024A: 26,832 million yuan - 2025E: 30,071 million yuan (YOY +12.1%) - 2026E: 32,638 million yuan (YOY +8.5%) - 2027E: 34,899 million yuan (YOY +6.9%) [4] - **Net Profit Forecasts**: - 2024A: -1,347 million yuan - 2025E: 903 million yuan (YOY +167.0%) - 2026E: 1,986 million yuan (YOY +120.0%) - 2027E: 3,029 million yuan (YOY +52.5%) [4] - **Earnings Per Share (EPS)**: - 2024: -3.20 yuan - 2025: 2.15 yuan - 2026: 4.72 yuan - 2027: 7.20 yuan [4] - **Valuation Ratios**: - Price-to-Earnings (P/E) ratio for 2025E: 75.3 - Price-to-Book (P/B) ratio for 2025E: 4.5 [4] - **Target Price**: The target price is set at $27.52, with the current price at $22.74 [4] Business Segment Performance - **Gaming Business**: Revenue for Q2 2025 was 1.61 billion yuan, a year-over-year increase of 60%, driven by the success of the "Three Kingdoms: Strategy" game [8] - **Advertising Business**: Revenue reached 2.45 billion yuan in Q2 2025, a year-over-year increase of 20%, benefiting from AI-driven efficiency and e-commerce demand [8] - **VAS (Value-Added Services) Business**: Revenue was 2.84 billion yuan in Q2 2025, a year-over-year increase of 11%, supported by live streaming and other services [8]

Core Viewpoint - The company reported a slight beat in 2Q25 Non-GAAP net profit, driven by lower-than-expected sales and R&D expenses, with revenue growth primarily from advertising and gaming sectors [1][2]. Financial Performance - 2Q25 revenue reached 7.338 billion yuan, a year-on-year increase of 19.8%, aligning with Bloomberg consensus (7.330 billion yuan) and internal expectations (7.321 billion yuan) [1]. - Non-GAAP net profit for 2Q25 was 562 million yuan, slightly above Bloomberg consensus (520 million yuan) and internal expectations (539 million yuan) [1]. - Advertising revenue grew by 20.2% year-on-year to 2.449 billion yuan, with a notable increase in eCPM [1]. - Gaming revenue surged by 60.1% year-on-year to 1.612 billion yuan, although a decline of 16-17% is expected in 2H25 due to high base effects [1][2]. Development Trends - The company is advised to focus on new game projects such as the繁中版 of "三谋", "代号：三国Ncard", "嘟嘟脸恶作剧", and self-developed "逃离鸭科夫", with revenue contributions anticipated from 4Q25 to 2026 [2]. - Value-added services revenue increased by 10.6% year-on-year to 2.837 billion yuan [2]. Profitability and Cost Management - 2Q25 gross margin improved by 0.2 percentage points to 36.5%, attributed to strong growth in performance advertising revenue and operational leverage [2]. - Sales and management expenses slightly decreased, while R&D expenses saw a modest increase, indicating cost control [2]. - The company expects gross margin to gradually rise to 37% by 4Q25, with long-term potential reaching 40-45% [2]. User Engagement - 2Q25 MAU, DAU, and average daily usage time all showed year-on-year growth, with DAU reaching 109 million [3]. - The company maintains a strong community attribute and user stickiness, with advertising budgets shifting towards core platforms [3]. Earnings Forecast and Valuation - The company maintains its Non-GAAP net profit forecasts for 2025 and 2026, with current trading multiples at 33/25 times 2025/2026 Non-GAAP P/E [3]. - The target price for Hong Kong stocks has been raised by 5.7% to 204 HKD, and for US stocks by 8.0% to 27 USD, indicating an upside potential of 3.7%/6.7% [3].

Core Insights - Bilibili's Q1 2025 performance exceeded expectations, with revenue of 7 billion RMB, a 24% year-on-year increase, and a narrowed net loss of 10.7 million RMB, down 99% from the previous year [1][4] - Following the earnings report, Bilibili's stock rose over 4% in the US market, reaching $18.7 per share, with a total market capitalization of $7.85 billion [2] Revenue Breakdown - The total revenue of 70 billion RMB in Q1 2025 was driven by four main segments: value-added services (40%), advertising (29%), mobile games (25%), and IP derivatives and others (6%) [6][7] - Value-added services generated 28.1 billion RMB, an 11% increase year-on-year, while advertising revenue reached 20 billion RMB, up 20% [7] - Mobile games saw the most significant growth, with revenue of 17.3 billion RMB, a 76% increase, largely due to the success of the game "Three Kingdoms: Strategy" [7] User Engagement - Bilibili reported an average daily active user count of 107 million and a record high monthly active user count of 368 million, with a net increase of 28 million monthly active users [5][6] - The average age of active users is 26, and the average daily usage time reached a historical high of 108 minutes [5] Cost Management - Despite a 24% increase in total revenue, operating costs only rose by 10%, indicating effective cost control [6] - Research and development expenses decreased by 13%, while general and administrative expenses fell by 3% [6] Cash Flow and Financial Health - Bilibili's operating cash flow for the quarter was 13.02 billion RMB, more than double the 6.38 billion RMB from the same period last year [6] - As of March 31, 2025, Bilibili held cash and cash equivalents, term deposits, and short-term investments totaling 17.4 billion RMB [9] Advertising Performance - Bilibili's advertising revenue was bolstered by over 100 million users engaging with home appliance content, leading to a nearly 40% increase in related advertising revenue [8] - Emerging sectors, particularly AI-related content, saw significant growth, with AI advertising revenue increasing by nearly 400% [8]

Macroeconomic Group - In April, M2 growth was 8% year-on-year, exceeding the expected 7.5% and the previous month's 7% [2] - The total social financing (TSF) year-on-year growth was 8.7%, slightly below the expected 8.8% and previous month's 8.4% [2] - The incremental TSF in April was 1.16 trillion yuan, lower than the expected 1.26 trillion yuan and significantly down from 5.89 trillion yuan in the previous month [2] Strategy and Advanced Manufacturing Group - Jilin Chemical Fiber announced a price increase of 10,000 yuan per ton for its wet-process carbon fiber products due to rising demand from low-altitude economy and drones [5] - The current market price for carbon fiber is around 200-220 yuan per kilogram, reflecting a 5% increase, the largest since previous price adjustments [5] - The carbon fiber industry is expected to improve as wind power installations grow and military orders resume, indicating a recovery from the worst phase [5] Consumer Group - Marubi Bio achieved a revenue of 2.97 billion yuan in 2024, a year-on-year increase of 33.4%, with a net profit of 330 million yuan, up 73.9% [8] - In Q1 2025, the company reported revenue of 850 million yuan, a 28% increase year-on-year, and a net profit of 130 million yuan, up 28.57% [8] - The eye care product segment saw a revenue of 690 million yuan in 2024, growing 60.8% year-on-year, with Q1 2025 showing an impressive 89.1% growth [9]

Core Insights - Tencent Holdings reported Q1 2025 revenue of 1800.2 billion yuan, a year-on-year increase of 13% [1] - Gross profit reached 1004.9 billion yuan, up 20% year-on-year, while operating profit (Non-IFRS) was 693.2 billion yuan, reflecting an 18% increase year-on-year [1] Business Line Performance - Value-added services generated revenue of 921 billion yuan, a 17% year-on-year growth, with domestic game revenue at 429 billion yuan, accounting for 23.8% of total revenue [3] - Financial technology and enterprise services grew by 5% to 549 billion yuan, now exceeding 30% of total revenue [3] - Marketing services achieved revenue of 319 billion yuan, marking a 20% year-on-year increase, continuing its rapid growth [3] R&D and AI Strategy - R&D investment increased by 21% year-on-year to 189 billion yuan [3] - The AI strategy focuses on comprehensive upgrades across all capabilities, enhancing model performance and application efficiency, thereby accelerating AI technology deployment and innovation across industries [3] Management Commentary - Chairman and CEO Ma Huateng emphasized the solid growth of high-quality revenue, stating that existing revenue will help absorb additional costs from AI investments while maintaining financial stability [4] - The company anticipates that strategic AI investments will create value for users and society, leading to long-term and substantial incremental returns [4]

Core Viewpoint - Tencent Holdings announced a solid growth trend in high-quality revenue for the first quarter of 2025, driven by substantial contributions from AI capabilities in its advertising and gaming sectors [1] Group 1: Business Performance - The company reported that its AI capabilities have made a significant impact on its performance in effect advertising and evergreen games [1] - Tencent is increasing investments in new AI opportunities, particularly in its Yuanbao application and within WeChat [1] Group 2: Financial Strategy - During the phase of strategic investment in AI, the existing high-quality revenue will help absorb the additional costs associated with these AI-related investments, maintaining financial stability [1] - Tencent anticipates that these strategic AI investments will create value for users and society, leading to long-term and substantial incremental returns [1]

Core Viewpoint - The company reported strong revenue and profit growth in Q1 2025, driven by robust performance in its effect advertising business and advancements in AI-enabled programmatic advertising. Financial Performance - In 2024, the company achieved revenue of 2.547 billion yuan, representing a year-over-year increase of 18.83%, with a net profit attributable to shareholders of 232 million yuan, up 6.81% year-over-year, and a non-recurring net profit of 217 million yuan, which increased by 30.10% year-over-year [1][2] - For Q1 2025, the company reported revenue of 929 million yuan, a significant year-over-year increase of 93.18%, with a net profit attributable to shareholders of 56 million yuan, up 11.67% year-over-year, and a non-recurring net profit of 61 million yuan, which increased by 30.78% year-over-year [1][2] Business Segmentation - In 2024, the effect advertising segment generated revenue of 2.484 billion yuan, reflecting a year-over-year growth of 22.45%, accounting for 97.52% of total revenue, with a gross margin of 16.90% [3] - The company’s revenue from the e-commerce sector was 513 million yuan, representing 20.14% of total advertising revenue, while revenue from applications, agents, and other sectors was 2.029 billion yuan, showing a year-over-year growth of 23.31% [3] - The company has expanded its advertising client base beyond e-commerce, maintaining its competitive edge while diversifying into other industries [3] Technological Advancements - The company has enhanced its programmatic advertising capabilities through AI, achieving a sevenfold increase in inference efficiency and reducing task execution time by over 30%, along with a 25% decrease in computational resource costs [3] - The company has become the first-level agent for AppLovin in Greater China, leveraging its technology platform for user behavior analysis, ad material optimization, and performance monitoring [3] Future Outlook - The company forecasts revenues of 3.301 billion yuan, 3.842 billion yuan, and 4.298 billion yuan for 2025, 2026, and 2027 respectively, with net profits of 301 million yuan, 372 million yuan, and 424 million yuan, corresponding to price-to-earnings ratios of 42, 34, and 30 [4] - The company is positioned as a leading player in overseas marketing services, with a new strategy focused on leveraging AIGC to drive brand expansion [4]