Bilibili (BILI US) is expected to see better profits and ad recovery in the future, according to a report by彭博. The company's 22Q1 performance was mixed, with MAU/rev growth of 31%/30% (in line with expectations). The non-GAAP net loss of RMB 16.5 billion was below the expected RMB 15.7 billion. The 2Q22E guidance is higher than the consensus/our estimate by 1%/4%. We expect 2Q22E growth of 9%, with game/ads/VAS/growth of -13%/6%/30%/0%. We expect GPM to be lower than 1Q22 (forecast 15%, -1ppt QoQ), while operating expenses to be flat. We believe the market's expectations for 2Q22E softness are good and suggest research lock on ad and e-commerce recovery (forecast 2H22E ad/VAS growth of 24%/30%). NPM will improve continuously in 2H22E, and GPM and operating costs will be better controlled. We maintain our revenue forecast unchanged, but reduce NPM by 2% in 22-24E. The target price is adjusted to USD 40. We expect 2Q22E profitability to improve and growth to recover. We expect 2Q22E growth of 9% (previously 4%). Games will see low YoY growth due to the absence of new key games and摊销 base.注意到游戏反弹应该比许可证恢复慢。建议关注将于6月推出的Pretty Derby（海外版）。我们估计，2Q22E的VAS rev将具有30%的同比弹性。我们预计2022年第二季度的广告同比增长6%，而电子商务将同比持平（高于预期，上海重新开放）。随着即将到来的疫情稳定和封锁放松，电子商务和广告将在2H22E逐渐恢复（预测2H22E广告同比增长24%）。Bili will reduce its operating expenses through cost control and S&M efficiency improvement to improve its LT profitability. The recovery of the pandemic and the silence of the games may temporarily suppress its profitability. 2Q22E GPM should be lower than 1Q22 (15%, -1ppt QoQ), but we expect a recovery.
