$Bilibili Inc.(BILI)$ (BILI, BUY) - Solid 4Q Driven by Gaming and Advertising; Strong Momentum Likely to Continue in 2025; Maintain BUY and $25 PT
We are maintaining our BUY rating and $25 PT after BILI reported above-consensus 4Q revenue and profits. 4Q DAU grew 3% y/y to 103M (vs. +4% in 3Q). MAU grew 1% y/y to 340M (vs. +2% in 1Q), with the DAU/MAU ratio largely stable at 30%. Engagement metrics remained healthy: average daily time was 99 minutes in 4Q, +4% y/y; average total daily video views grew 12% to 4.8B (vs. +23% in 3Q); average monthly interactions increased 3% y/y to 15.5B.
Driven by the continued success of San Guo, Mobile Game revenue grew 79% y/y in 4Q (vs. +84% in 3Q). BILI believes San Guo will have a long lifecycle of over five years and will focus on its operation in 2025. BILI stated that San Guo has stable DAUs across five seasons and targets at least a 5-year lifecycle. Launching new maps and new features in the upcoming Season 6 on Feb. 22. Also planning a June anniversary event, PC version, overseas release in H2 2025.
Advertising revenue grew +24% y/y in 4Q, decelerating 4pt from 3Q and was largely in line with Tiger/Street, but still meaningfully faster than industry growth. Ad revenue per DAU also grew over 20% y/y. Performance-based ads (+40% YoY) were a key driver. 30% more advertisers joined in 2024, diversifying industry verticals (e.g., games, e-commerce, automotive). AI-powered ad targeting & content creation also improved efficiency. VAS grew 8% y/y, decelerating 1pt from +9% in 3Q.
Overall gross margin was up 991bps y/y and 118bps q/q, driven by revenue mix shift to high-margin businesses (ads + games now contribute 54% of revenue). Despite 26% revenue growth, total Opex only grew 2% y/y, largely on operating leverage. As a result, non-GAAP operating margin up 17pts y/y and 9pts q/q to 4%, achieving non-GAAP EBIT profitability for the first time in the company’s history.
2025 focus: Expand profit margins, enhance monetization, and sustain community growth. High-quality content remains the core competitive moat, as short-form video supply is now saturated. AI will be integrated to improve ad efficiency and user experience. Mgmt. also mentioned open-source AI models like DeepSeek will allow Bilibili to leverage its vast video & user data assets.
4Q total revenue 2%/1% above Tiger/Street. By segment, mobile games revenue grew 79% y/y, 2%/1% above Tiger/Street. VAS revenue grew 8% y/y (vs. +9% in 3Q), 3% above Tiger/Street. Advertising revenue grew 24% y/y (vs. +28% in 3Q), largely in line with Tiger/Street. IP derivatives and others revenue decreased 16% y/y, 2%/1% below Tiger/Street.
Non-GAAP operating income 16% above Tiger/Street, with margin 75bps/77bps higher. Revenue-sharing cost was RMB 3.16B, or 41% of total revenue, down 3pt y/y but up 1pt q/q. Cost of revenue ratio was 63.9%, down 991bps y/y and 118bps q/q. Total Opex was 1% below Tiger.
1Q outlook. Expects gaming revenue to grow by 70-75% y/y, with San Guo’s gross billing from Season 5 remaining stable compared to Season 4. Ad is projected to increase by around 20% y/y, with performance ads growing at a faster pace, leading to a higher overall contribution and a positive impact on gross margins. VAS revenue is expected to grow by approximately 10% y/y, with strong performance from the fan charging program. IP derivatives and other revenues are expected to decline by 10% y/y. The gross margin is expected to remain similar to Q4, but there is room for y/y improvement throughout the year. Opex will remain at Q4 levels, and adjusted operating profit will stay positive, exceeding RMB 200 million. Looking ahead, Q2 revenue is expected to further increase, and with no Chinese New Year Gala-related expenses, profits should see sequential growth as well.
Estimate revisions. Increasing 1Q revenue estimate by 2%, gross income by 3%, with margin 20bps higher, but increasing opex, yielding RMB 92M lower non-GAAP operating income. Increasing '25 revenue estimate by 1%, gross income by 1% on 4bps higher margin, but increasing opex, yielding RMB 137M lower non-GAAP operating income.A tool to boost your purchasing power and trading ideas with CashBoost!
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