Citi Research highlighted in a report that Bilibili (BILI.US) reported a 12% growth in total revenue for 1FQ24, outperforming broker and consensus expectations by 2% and 1% respectively.
Looking at each business segment, Bilibili's mobile game revenue fell 13% YoY, 3% below the broker's estimate. Value-added service revenue lifted 17% YoY, 3% above the broker's prediction. Advertising revenue hiked 31% YoY, 3% above the broker's forecast.
Bilibili's non-GAAP gross margin rose from 26.4% in 4FQ23 to 28.6% in 1FQ24, while non-GAAP operating margin improved from minus 10% in 4FQ23 to minus 9% in 1FQ24. Non-GAAP net loss was RMB440 million, which is lower than broker and consensus forecasts of RMB496 million and RMB498 million respectively.
According to Citi, the overall performance of Bilibili was in line with expectations for 1FQ24, with profit margins even better than expected. Among them, the advertising business achieved good YoY growth, but the performance of the game business was slightly weaker than expected due to the lack of new games in the market.
In addition, Bilibili's non-GAAP gross margin grew by 2.2% QoQ, narrowing its loss slightly more than market consensus. This may have benefited from a shift in the company's revenue mix towards higher-margin advertising and further cost optimisation initiatives. The company's operating expenses were also largely in line with the broker's expectations.
Citi also pointed out that in light of the recent rise in Bilibili's share price, investors may be more concerned about updates for its new Three Kingdoms-themed game, the outlook for growth in advertising revenue, and the trend in profit margins. Citi gave Bilibili US shares a target price of US$13.5 and a Neutral rating.
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