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

Equity Bottom-Up

<ul>
<li>Unity’s 4Q22 top line was in line with our estimate, and non-GAAP operating income beat our estimate/cons. by 9.7%/32.9%. </li>
<li>As ads market gradually stabilizes, we expect Unity ads to gain share as ironSource merger releases more synergy.</li>
<li>In addition to increasing customer base, revenue contribution from industries (beyond games) keeps expanding. Maintain BUY and raise TP to US$ 50. Our TP implies 8.4X PS/121X PE in 2023.</li>
</ul>


Unity’s 4Q22 top line was in line with our estimate, and non-GAAP operating income beat our estimate/cons. by 9.7%/32.9%. 
As ads market gradually stabilizes, we expect Unity ads to gain share as ironSource merger releases more synergy.
In addition to increasing customer base, revenue contribution from industries (beyond games) keeps expanding. Maintain BUY and raise TP to US$ 50. Our TP implies 8.4X PS/121X PE in 2023.


[Unity Software Inc. (U US) Target Price Change]: Maintain BUY for Merger Synergy and Prudent Costs

<ul>
<li>We forecast that Unity's top line/bottom line would be 2.8% /24.7% vs cons. in 4Q22, with  synergies from ironSource merger to take effect and gaming market to gradually recover. </li>
<li>Price increase for Create segment and improved monetization for Operate segment would further boost the company's 2023 outlook, leading to top line/bottom line beating cons. by 3%/55%.</li>
<li>Due to our optimism of both industry and company uptrend, we upgrade to BUY and raise TP to US$ 48.2, implying 7.2X PS/ 159X PE in 2023.</li>
</ul>


We forecast that Unity's top line/bottom line would be 2.8% /24.7% vs cons. in 4Q22, with  synergies from ironSource merger to take effect and gaming market to gradually recover. 
Price increase for Create segment and improved monetization for Operate segment would further boost the company's 2023 outlook, leading to top line/bottom line beating cons. by 3%/55%.
Due to our optimism of both industry and company uptrend, we upgrade to BUY and raise TP to US$ 48.2, implying 7.2X PS/ 159X PE in 2023.


[Unity (U US, BUY, TP US$48.2) Rating Change]: Major Catalysts to Realize Among Industry Recovery

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Capital Markets

<ul><li>Unity Software delivered a mixed set of results as its revenues failed to meet market expectations but its net loss was narrower than expected.</li><li>The company continued with a robust customer pull in its newer Artistry and Digital Twins segments.</li><li>We provide the stock of Unity with a ‘Buy’ rating and a revision in the target price.</li></ul>

Unity Software delivered a mixed set of results as its revenues failed to meet market expectations but its net loss was narrower than expected.The company continued with a robust customer pull in its newer Artistry and Digital Twins segments.We provide the stock of Unity with a ‘Buy’ rating and a revision in the target price.

Unity Software: Native Game Engine Support For Windows & Other Drivers

<ul><li>Unity Software has been in the news for a number of reasons be it the ironSource acquisition or the management’s rejection of Applovin’s $20 billion acquisition offer.</li><li>While Unity did surpass Wall Street expectations with respect to revenues, the company’s losses were wider than anticipated.</li><li>On Oculus Quest, Unity Games accounted for 72% of the top-selling games and 80% of the top-performing VR games in July.</li></ul>

Unity Software has been in the news for a number of reasons be it the ironSource acquisition or the management’s rejection of Applovin’s $20 billion acquisition offer.While Unity did surpass Wall Street expectations with respect to revenues, the company’s losses were wider than anticipated.On Oculus Quest, Unity Games accounted for 72% of the top-selling games and 80% of the top-performing VR games in July.

Unity Software: The AppLovin Acquisition Story & Other Developments

<ul><li>This is our first report on game development software market leader, Unity Software.</li><li>The company’s stock has taken a beating loke most other software players with a negative bottom-line.</li><li>Its previous quarterly result was also below par despite the company generating $320 million, an increase of 36% from the previous year.</li></ul>

This is our first report on game development software market leader, Unity Software.The company’s stock has taken a beating loke most other software players with a negative bottom-line.Its previous quarterly result was also below par despite the company generating $320 million, an increase of 36% from the previous year.

Unity Software Inc.: Initiation of Coverage – IronSource Acquisition

United States

Unity Software Inc. provides software solutions. The Company offers graphic tools to create, run, and monetize real-time 2D and 3D content for mobile phones, tablets, PCs, consoles, and augmented and virtual reality devices. Unity Software serves customers worldwide.

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Unity Software (U US)

[Unity Software Inc. (U US) Target Price Change]: Maintain BUY for Merger Synergy and Prudent Costs

As ads market gradually stabilizes, we expect Unity ads to gain share as ironSource merger releases more synergy. Revenue contribution from...

Blue Lotus Research Institute

[Unity (U US, BUY, TP US$48.2) Rating Change]: Major Catalysts to Realize Among Industry Recovery

Due to our optimism of both industry and company uptrend, we upgrade to BUY and raise TP to US$ 48.2, implying 7.2X PS/ 159X PE in 2023.

Blue Lotus Research Institute

Unity Software: Native Game Engine Support For Windows & Other Drivers

Unity Software delivered a mixed set of results as its revenues failed to meet market expectations but its net loss was narrower than...

Baptista Research

Unity Software: The AppLovin Acquisition Story & Other Developments

Unity Software has been in the news for a number of reasons be it the ironSource acquisition or the management’s rejection of Applovin’s $20...

Baptista Research

Unity Software Inc.: Initiation of Coverage – IronSource Acquisition

This is our first report on game development software market leader, Unity Software. The company’s stock has taken a beating loke most other...

Baptista Research

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