YY delivered eye-catching 2Q20 results, with revenue/adj. net profit +36% YoY/+38%% YoY, 14%/12% above consensus. 3Q20 rev guidance came in at +26.7%-29.9% YoY, midpoint 6% above consensus. We turn more bullish on Bigo’s momentum, with higher FY20E rev guidance (+100% YoY, vs. previous +65% YoY), despite geographic risks. We raised its EPS by 1%/3%/1% in FY20/21/22E for stronger Bigo, and lifted our TP to US$110 from US$99 on higher Bigo’s revenue.
- All round beat. 2Q20 revenue grew 36% YoY (-7% pro-forma), 14%/14% above our estimates/ consensus. Adj. net profit grew 38% YoY (-5% pro-forma), 12% above consensus. Mgmt. guided solid 3Q20 rev at RMB5.85bn-RMB6.00bn (midpoint +28% YoY), 4%/6% above our estimates/consensus. YY also announced a quarterly dividend policy for the next three years, with US$25mn quarterly dividend from 2Q20. We believe this result would drive its price up, after recent pullback on geographic risks.
- More bullish on Bigo’s outlook, backed by higher rev guidance. As stated in our preview report, we keep confident on Bigo’s overseas expansion, with limited financial impact from ban in India (< 5%/2% of Bigo/JOYY rev) and potential risk in US (~10%/4% of Bigo/JOYY rev). We are impressed by Bigo’s momentum, which was up 149% YoY in 2Q20 (vs. consensus of 70%-80% YoY), backed by outperformance in SEA and developed market. Mgmt. raised Bigo’s FY20E rev guidance, at +100% YoY (vs. previous +65% YoY). Given overseas livestreaming TAM of over US$10bn, we believe Bigo is still at early development, and its monthly breakeven target in 4Q20E stays intact. We forecast its adj. net loss at US$70mn in FY20E (vs. previous US$100mn).
- YY Core slightly soft on epidemic and regulation. YY Core’s revenue declined 9.1% YoY in 2Q20, slightly below our estimate, mainly on epidemic impact and regulation headwinds. We expect YY Core to decrease 5% YoY in 3Q20E, with stable non-GAAP OPM at 21%.
- Maintain BUY. To reflect better outlook of Bigo, we raised its EPS by 1%/3%/1% in FY20/21/22E, and lifted our SOTP-based TP from US$99 to US$110 (22x FY21E P/E). Maintain BUY.
