Bilibili lnc. (BILI) Equity Research·Company Research·Media 1 / 9 东吴证券（香港） 请务必阅读正文之后的免责声明部分 [Table_Main] 3Q22 Review: watch out for sustainability of cost savings & efficiency improvements and monetization rate hike Buy (Maintain) Forecast & Valuation 2021A 2022E 2023E 2024E Revenue (RMB mn) 19,384 21,826 28,263 34,157 Growth (YoY %) 62% 13% 29% 21% Net profit (RMB mn) -6,789 -8,056 -5,154 -1,986 Growth (YoY %) - - - - Non-GAAP Net profit (RMB mn) -5,478 -6,954 -4,024 -620 Growth (YoY %) - - - - Non-GAAP EPS (RMB) -17.19 -20.39 -13.05 -5.03 Key words: # declining cost Investment Thesis ◼ Events: Bilibili reported 3Q22 revenue of RMB5.8bn (+11% yoy, slightly beat market expectations), GPM and Non-GAAP NPM of 18.2% and -30.5% (both ~1pct higher than market expectations). ◼ With steady operation improvements, BILI aims to pay more attention to user quality. In 3Q22, BILI recorded MAU of 333mn (+25% yoy), DAU of 90.3mn (+25% yoy), average daily time spent of 96min (+8min qoq), and MPU of 28.5mn (+19% yoy). BILI does not change the MAU target of 400mn by 2023 end but will put more stress on DAU growth to drive overall platform activity, user quality and monetization rate. BILI's DAU/MAU ratio currently reaches 27%, and we expect it to further rise to 30% by 2023. ◼ Mobile games: strategic focus on self-developed games with more concentration in the future. In 3Q22, BILI recorded mobile game revenue of RMB1.47bn (+6% yoy), mainly benefiting from the launch of new games in the domestic and overseas markets. BILI announced to adjust its self-developed games strategies and focus on categories like ACGN, to create high-quality self-developed games of high competitiveness. We expect the revenue and pipeline share of BILI's self-developed games to continue to increase and games revenue in 4Q22 to reach RMB1.16bn (-11% yoy). ◼ With ongoing consolidation of ad infrastructure, we expect BILI to achieve higher monetization efficiency in the future. In 3Q22, BILI reported ad revenue of RMB1.36bn (+16% yoy), with performance-based ad growing more than 50% yoy, mainly due to reduced brand ad budgets amid the weak macro and consumption. Increasing activity of Story Mode: in 3Q22, BILI's average daily video views grew by 64% yoy, with views of Story Mode increasing more than 473% yoy. Since short videos have a higher monetization efficiency, we expect Story Mode to continue to provide incremental revenues & profits. In addition, BILI made initial progress in open-loop e-commerce business in 3Q22 and would continue to promote commercialization & consumption scenarios in the future. We expect e-commerce related ad to support BILI's commercialization in the medium term. We estimate BILI's advertising revenue to be RMB1.55bn in 4Q22 (-2.5% yoy). ◼ Live broadcasting remained solid while paying ratio of premium memberships declined qoq: in 3Q22, BILI recorded value-added service (VAS) revenue of RMB2.2bn (+16% yoy). Thanks to the integration strategy of live broadcasting and video, BILI's live broadcasting revenue in the first three quarters of 2022 grew by 30% yoy. In 3Q22, the number of creators being both uploader and anchors increased by 73% yoy. The combination of live broadcasting and video can effectively improve user activity and monetization efficiency. Affected by the delay of new contents launch, the number of premium memberships declined by 3% qoq to 20.4mn. We estimate BILI's service revenue to be RMB2.26bn in 4Q22 (+19% yoy). [Table_PicQuote] Price Performance [Table_Base] Market Data Closing price (USD) 15.40 52-week Range (USD) 8.23/89.80 P/B (X) 2.91 Float Cap (USD mn) 4,869.51 Market Cap (USD mn) 6065.00 Basic Data BVPS (RMB, LF) 37.75 Liabilities/assets (%, LF) 68.4% Total Issued Shares (mn) 395.1 Shares outstanding (mn) 316.20 [Table_Report] Related reports 《哔哩哔哩(BILI)：2022Q2点评：短期收入和利润承压，静待宏观经济恢复及管理效率提升》 2022-09-10 《哔哩哔哩(BILI)： 2022Q1点评：疫情逆风影响持续至二季度，看好公司下半年营收及及利润率改善 》 2022-06-10 Soochow Securities International Brokerage Limited would like to acknowledge the contribution and support provided by Soochow Research Institute, and in particular its employees Liangwei Zhang (张良卫) and Xunyue He (何逊玥). [Table_Author] 12 December 2022 Research Analyst Ruibin Chen (852) 3982 3212 chenrobin@dwzq.com.hk -100%-80%-60%-40%-20%0%20%40%2021-112022-052022-11BILI.OIXIC.GI Bilibili lnc. (BILI) Equity Research·Company Research·Media 2 / 9 东吴证券（香港） 请务必阅读正文之后的免责声明部分 ◼ Resolute attitude of cost savings and efficiency improvements begins to see initial results. In 3Q22, BILI's GPM grew by 3.2pct qoq to 18.2%, mainly benefited from the continuous decline of unit bandwidth cost. Sales expense declined by 25% yoy to RMB1.23bn (21% of total revenue). With the shift of BILI's focus to DAU growth, we expect more controllable sales expenses in the future. R&D expense grew by 44% yoy to RMB1.13b