China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

<ul>
<li>We suggest that both Tencent and NetEase will launch blockbuster new games in their pipelines during this year's summer vacation, with NetEase slightly surpassing Tencent.  </li>
<li>Although iQIYI, Kuaishou, and BILI each have new games, their contributions are relatively small, so we maintain a SELL rating for these three companies;</li>
<li>Investors can also pay attention to Nexon and Netmarble, two Korean game companies that are expected to benefit from the launch of new games;  </li>
</ul>


We suggest that both Tencent and NetEase will launch blockbuster new games in their pipelines during this year's summer vacation, with NetEase slightly surpassing Tencent.  
Although iQIYI, Kuaishou, and BILI each have new games, their contributions are relatively small, so we maintain a SELL rating for these three companies;
Investors can also pay attention to Nexon and Netmarble, two Korean game companies that are expected to benefit from the launch of new games;  


Blue Lotus Entertainment Sector Update: Tencent, NetEase and Kingsoft Have Strong Pipeline

<ul>
<li>PDD/1024.HK/700.HK: PDD adds an entrance that is dedicated to viewing live broadcasts (+/-/-)</li>
<li>Luckin Coffee: Luckin Coffee cooperate with OneContract Cloud to develop internal contract management system, which is intended to improve the efficiency of franchise store opening.</li>
<li>BILI: Bilibili Will Change Video Display Metrics to Measure Watch Time Instead of View Counts (-)</li>
</ul>


PDD/1024.HK/700.HK: PDD adds an entrance that is dedicated to viewing live broadcasts (+/-/-)
Luckin Coffee: Luckin Coffee cooperate with OneContract Cloud to develop internal contract management system, which is intended to improve the efficiency of franchise store opening.
BILI: Bilibili Will Change Video Display Metrics to Measure Watch Time Instead of View Counts (-)


China TMT Update-PDD/1024.HK/700.HK/Luckin/BILI: PDD Adds Live Broadcasts;Bili Changes Video Display

<ul>
<li>PDD/CPNG/SE: PDD's Temu plans to come to Southeast Asia and South Korea,  negative to Shopee and Coupang (+/-/-)</li>
<li>KE Holding: New home sales remain lukewarm in May, leaving more space for potential incentive policies.</li>
<li>BILI: Bilibili's top anchor achieved a single-session GMV of 28 million yuan during the 618 live-streaming sales event (+)</li>
</ul>


PDD/CPNG/SE: PDD's Temu plans to come to Southeast Asia and South Korea,  negative to Shopee and Coupang (+/-/-)
KE Holding: New home sales remain lukewarm in May, leaving more space for potential incentive policies.
BILI: Bilibili's top anchor achieved a single-session GMV of 28 million yuan during the 618 live-streaming sales event (+)


China/Asia TMT Update-PDD/CPNG/SE/BEKE/BILI:PDD's Temu Plans to Come to ASEAN and South Korea

Greater China Equity Long/Short Analyst

Eric Chen

Equity Bottom-Up

<ul>
<li>Further evidence of BILI’s user base peaking reinforces our bearish view on its growth outlook.</li>
<li>BILI’s business model is broken and we believe significant downsizing is unavoidable in the next 12- 18 months to achieve profitability.</li>
<li>The company will survive as a leaner and slightly profitable business valued at high single-digit P/E. We still see tremendous downside from here and advise investors to avoid the stock.</li>
</ul>


Further evidence of BILI’s user base peaking reinforces our bearish view on its growth outlook.
BILI’s business model is broken and we believe significant downsizing is unavoidable in the next 12- 18 months to achieve profitability.
The company will survive as a leaner and slightly profitable business valued at high single-digit P/E. We still see tremendous downside from here and advise investors to avoid the stock.


BILIBILI (BILI US): Cracks in Business Model

<ul>
<li>BILI reported 1Q23 revenue/non-GAAP net income (4.2%)/in-line vs. our estimate, but BILI’s suggested 2Q23 revenue and gross margin are (10%) and (3.5ppts) lower vs. our prior est.; </li>
<li>Gaming will be BILI’s major swing factor.  Although BILI indicated that 2Q23 gaming revenue could decline 10% YoY, we expect that gaming revenue will still grow 6%~ YoY in 2023.; </li>
<li>We maintain SELL rating and cut TP to US$ 14.1. 1Q23’s earning indicates that BILI’s cost saving measures have led to declining MAU.</li>
</ul>


BILI reported 1Q23 revenue/non-GAAP net income (4.2%)/in-line vs. our estimate, but BILI’s suggested 2Q23 revenue and gross margin are (10%) and (3.5ppts) lower vs. our prior est.; 
Gaming will be BILI’s major swing factor.  Although BILI indicated that 2Q23 gaming revenue could decline 10% YoY, we expect that gaming revenue will still grow 6%~ YoY in 2023.; 
We maintain SELL rating and cut TP to US$ 14.1. 1Q23’s earning indicates that BILI’s cost saving measures have led to declining MAU.


BILI US, SELL, TP US$14.1, Target Price Change: Thriving Gaming Market Makes Limited Contribution

China

Bilibili Inc. provides online entertainment services. The Company offers a platform that covers a wide array of genres and media formats, including videos, live broadcasting, mobile games, animation, and comics. Bilibili serves customers in China.

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Bilibili (BILI US)

Blue Lotus Entertainment Sector Update: Tencent, NetEase and Kingsoft Have Strong Pipeline

We suggest that both Tencent and NetEase will launch blockbuster new games in their pipelines during this year's summer vacation, with NetEase...

Blue Lotus Research Institute

China TMT Update-PDD/1024.HK/700.HK/Luckin/BILI: PDD Adds Live Broadcasts;Bili Changes Video Display

PDD/1024.HK/700.HK: PDD adds an entrance dedicated to viewing live broadcasts (+/-/-);Luckin Coffee: Luckin Coffee cooperate with OneContract...

Blue Lotus Research Institute

China/Asia TMT Update-PDD/CPNG/SE/BEKE/BILI:PDD's Temu Plans to Come to ASEAN and South Korea

PDD/CPNG/SE: PDD's Temu plans to come to Southeast Asia and South Korea，KE Holding: New home sales remain lukewarm in May, BILI: Bilibili's top...

Blue Lotus Research Institute

BILIBILI (BILI US): Cracks in Business Model

BILI's business model is broken and the odds are high for a downsizing in its attempt to achieve profitability. We still see tremendous downside to...

Eric Chen

BILI US, SELL, TP US$14.1, Target Price Change: Thriving Gaming Market Makes Limited Contribution

We maintain SELL rating and cut TP to US$ 14.1. 1Q23’s earning indicates that BILI’s cost saving measures have led to declining MAU.

Blue Lotus Research Institute

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