Guosen Securities has reaffirmed its "Outperform" rating for Bilibili-W (09626). The company's advertising business continues to benefit from the release of potential inventory and increasing demand from sectors such as gaming and AI applications. The brokerage has revised its 2026-2027 revenue forecasts for the company to RMB 33.7 billion and RMB 37.3 billion, representing increases of 3.2% and 2.2% respectively, and introduced a new 2028 revenue estimate of RMB 41.2 billion. Adjusted net profit forecasts for 2026-2027 were set at RMB 3.3 billion and RMB 4.2 billion, primarily due to increased capital expenditures in AI and recruitment of top talent, with a new 2028 adjusted net profit estimate of RMB 5.3 billion. Key observations from Guosen Securities are as follows:
The company reported strong revenue growth this quarter, achieving total revenue of RMB 8.321 billion, an 8% year-over-year increase. Breaking down the revenue: 1) Value-added services revenue reached RMB 3.3 billion, up 6% year-over-year, demonstrating steady growth. The number of premium members exceeded 25.3 million, representing a 13% year-over-year increase according to the brokerage's calculations, while the charging business saw rapid growth exceeding 100%; 2) Advertising revenue totaled RMB 3 billion, a 27% year-over-year increase, mainly driven by the release of potential ad inventory. Beyond the news feed scenario, ad consumption in search, PC large screen, and mini-program scenarios grew over 60% year-over-year, with some exceeding 200%. Advertising eCPM continued to improve driven by technological upgrades. The top five advertising industries in Q4 were gaming, digital appliances, internet services, e-commerce, and automotive. Q4 advertising primarily benefited from incremental demand generated by competition in AI applications and the instant retail battle; 3) Gaming revenue reached RMB 1.5 billion. Additionally, the self-developed standalone game "Escape from Duckov" sold over 3 million copies within its first three weeks after its October 2025 launch, ranking as the third best-selling standalone game in domestic history for the year. Development of console and mobile versions is currently underway to further explore the IP's potential; 4) IP derivative and other revenue amounted to RMB 480 million, a 3% year-over-year increase.
The company's adjusted net profit was RMB 880 million, with an adjusted net profit margin of 11%, representing a 5 percentage point improvement compared to the same period last year. Adjusted operating profit reached RMB 840 million, with the adjusted operating profit margin increasing from 6% to 10%. The adjusted net profit exceeded adjusted operating profit, partially attributable to gains from changes in the fair value of investments. The gross profit margin was 37%, up 1 percentage point year-over-year. Sales expense ratio/R&D expense ratio/administrative expense ratio were 13.6%, 11.9%, and 6.3% respectively, primarily due to operating leverage released by the rapid growth in advertising revenue. The brokerage estimates that for every RMB 100 million increase in advertising revenue, operating profit increases by approximately RMB 50 million. Notably, management indicated that a portion of the annual incremental profit will be invested in AI, focusing on enhancing creator productivity and optimizing content recommendation efficiency.
Regarding shareholder returns, the company repurchased USD 14.7 million worth of shares this quarter. Since November 2024, cumulative share repurchases have reached USD 131 million, with approximately USD 70 million remaining under the current repurchase authorization. Risk factors include operational uncertainties arising from corporate restructuring and systemic macroeconomic risks.
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