Bilibili delivered positive 3Q20 results, with revenue +74% YoY, 5% above consensus. Margin slightly missed, but 4Q20E rev guidance beat 12%. User metrics trend well, with MAU up to 197mn (+54% YoY). Backed by its 3C strategy, we reiterate our confidence on its user expansion and monetization enhancement. We expect game to accelerate in 4Q20E and VAS & ads to benefit from hot content (e.g. HOB <天官赐福>) and ecommerce ads demand in peak season. We slightly lifted its topline by 5%/5%/5% in FY20/21/22E, with higher DCF-based TP of US$62.
- 3Q20 beat on topline and guidance. 3Q20 revenue was RMB3.2bn, +74% YoY, 5% above consensus. Non-GAAP net loss came in at RMB971mn (vs. consensus of RMB902mn). Margin slightly missed on heavier S&M efforts for user acquisition. 4Q20E rev guidance came in at RMB3.6-3.7bn, +79% to +84% YoY, with midpoint 12% above consensus. We view this result as positive, as market focuses more on its user & topline momentum than profitability.
- User metrics trend well. 3Q20 user metrics outperformed, with MAU up to 197mn (+54% YoY) and retention rate at 7.6%. Mgmt stated that 50% of its net adds came from lower-tier cities, with average age of 20. New users at the age of 30+ increased, suggesting effective all-age group expansion on enriched content. Mgmt reiterated their confidence to achieve 2021 MAU target of 220mn ahead of plan, backed by ROI-driven marketing and multi-channel promotion.
- 3C strategy to enhance monetization. Bilibili will step up enriching its OGV & self-produced content, with vibrant & high-quality pipeline. Thanks to its 3C strategy, we keep bullish on its monetization, especially on VAS & ads potential. Game rev grew 37% YoY in 3Q20. We expect game to accelerate in 4Q20E thanks to more contribution from new games. There are 10 titles in pipeline with approval, and Sword Art Online will be launched in beginning of 2021. Livestreaming & VAS/ Ads +116%/126% in 3Q20, in which VAS paying members reached 12.8mn (+110% YoY). We expect VAS and ads momentum to continue in 4Q20E, supported by hot content (e.g. HOB <天官赐福>) and ecommerce ads demand in peak season.
- Maintain BUY. To reflect better topline outlook, we slightly lifted its rev by 5%/5%/5% in FY20/21/22E, with higher TP of US$62 (8x FY21E P/S) from US$57. Considering stepping-up monetization diversification, we see high visibility for Bili to expand its TAM with effective operating leverage in the long run.
