China Merchants Securities has reaffirmed its "Overweight" investment rating for BILIBILI-W (09626). The company's exclusive SLG game "Three Kingdoms: Strategic Supremacy," launched in 2024, has performed strongly. A robust pipeline including "Escape from Duckov," "Shine! Lumi," and "Three Kingdoms Hundred Generals" is expected to drive future performance growth. The platform has also significantly increased its advertising market share across multiple sectors, indicating substantial commercial potential. Revenue for 2026-2028 is projected to reach RMB 33.3 billion, RMB 35.8 billion, and RMB 39.4 billion, respectively. Adjusted net profit attributable to owners is forecast at RMB 3.13 billion, RMB 4.01 billion, and RMB 4.80 billion, corresponding to P/E ratios of 23.5x, 18.4x, and 15.3x. Key points from the analysis are as follows.
The company reported better-than-expected adjusted net profit for the quarter, achieving its first annual profit. According to its Q4 and full-year 2025 financial results, Q4 revenue reached RMB 8.32 billion, an 8% year-over-year increase. Adjusted net profit surged 94% to RMB 878 million, with an adjusted net profit margin of 10.6%, up 4.8 percentage points. Gross profit for the quarter was RMB 3.08 billion, up 11%, with a gross margin of 37.0%, a 0.9 percentage point improvement. Full-year total revenue reached RMB 30.35 billion, a 13% annual increase, while adjusted net profit was RMB 2.59 billion, marking the first profitable year.
Advertising business accelerated, demonstrating growing commercial value. Value-added services revenue in Q4 was RMB 3.26 billion, up 6% year-over-year, primarily driven by growth in paid membership and other value-added services. Advertising revenue reached RMB 3.04 billion, a significant 27% increase, attributed to improved ad product supply and enhanced advertising efficiency. Mobile games revenue was RMB 1.54 billion, influenced by the high initial revenue base from the exclusively licensed SLG game "Three Kingdoms: Strategic Supremacy," which launched in June 2024. The game began its new S13 season on February 28, quickly rising to the Top 5 on the iOS game bestseller chart. Regarding new games, the self-developed PVE extraction shooter "Escape from Duckov," released on October 16, has sold over 3 million copies, with a mobile version now in development. Additionally, the Three Kingdoms IP card game "Three Kingdoms Hundred Generals" is scheduled for its final test on March 18, indicating a strong future pipeline. IP derivative and other businesses generated revenue of RMB 477 million in Q4, up 3%.
The company continues to focus on high-quality medium and long-form video content, with user metrics reaching new highs. Core user indicators have accelerated for four consecutive quarters. Daily active users in Q4 averaged 113 million, a 10% year-over-year increase. Monthly active users reached 366 million, up 8%. Average daily usage time increased to 107 minutes, an 8-minute gain. The number of premium members stands at 25.35 million, reflecting high community engagement. Annual average revenue per UP creator increased by 21%, and viewership time for AI-related content grew by 73%. By hosting exclusive events such as bullet-screen interactions for the CCTV Spring Festival Gala, the "Bilibili New Year's Eve" celebration, and the "Bilibili First Day of Lunar New Year" gala, the company has further boosted user activity. The analysis views the platform's advertising commercial potential as substantial, expects the diverse game pipeline to contribute to performance growth, and notes benefits from increased AI application advertising budgets, supporting a positive outlook on the company's commercial value realization. Risks include potential slower-than-expected user growth, industry regulatory challenges, loss of key content creators, and intensified competition.
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