Can bilibili be reborn under the price scale?
My own great pleasure in business analysis is that it can correct the short-sighted and speculative side of my character. At the beginning of the value analysis of enterprises, my bad personality defects will appear. It is common to push back the intrinsic value with the current market value and pursue the short-term stock increase. Of course, in practice, the contradiction between short-sightedness and speculation often gives me a headache.
Based on the principle of long-term value investment, I warned myself that ignoring or reducing the current market value weight of enterprises as much as possible, respecting the objectivity of intrinsic value of enterprises, and deeply thinking that eliminating this interference is the beginning of rational analysis.
I went through the above changes in my analysis of bilibili. When bilibili was around $60, I thought it was overvalued.The reason is that a large amount of investment in copyright will greatly delay its profit cycle, and it is difficult to maintain a high level of valuation only by market sales rateWith the beginning of water release in the United States under the epidemic, After writing the article, the stock price has more than tripled, The article caused a group of ridicule, Now Bilibili's share price has dropped below $50 from its high point, There is a serious bad-mouthing mentality in the outside world, and some analysts must start to push back the fundamentals with stock prices, thinking that enterprises have such problems and that stock prices will continue to fall. If market sentiment is measured by stock prices, the number of enterprise problems in comments will obviously increase when stock prices fall, which obviously has nothing to do with stock prices.
Should analysts follow the stock price or walk ahead of it? We continue to take Bilibili as a sample for analysis.
Bilibili's stock price has been stimulated like a roller coaster in the past year. Even if the market can use the excuse of "industry depression" to explain the phenomenon of stock price decline throughout the year, in fact, the stock price has indeed underperformed the overall stock market. Comparing with Hang Seng Technology Index can confirm:
Within one year, bilibili's stock price is facing great pressure, but its performance is better than Hang Seng Technology Index in most of 2021, that is, its performance is better than that of most industry enterprises, butAt the end of the year, the stock price fell rapidly, such as "diving", and finally performed worse than its peers.This has also triggered the voice of bad singing in the industry.
From the timeline, the stock price cliff decline began with the Q3 financial report in 2021. What happened to the current financial report, which aroused our interest.
The most controversial point in the current financial report may lie in the loss. The current operating loss is close to 1.9 billion yuan, an increase of 800 million yuan over the same period of last year.Turning losses in the short term seems to be out of reach, and market pessimism spreads.
The most noticeable things in the income statement are gross profit margin and market expenses. In the past, market optimists were optimistic about these two sets of data. The logic is that the proportion of advertising revenue increases, which stimulates the gross profit margin level to be favorable. After users reach a certain scale, they can have inertia growth advantage, which reduces the level of market expenses.
This logic is roughly true around Q2 in 2021. At that time, both sets of data were improving their intervals, but there were some changes in Q3 in 2021, as shown in the figure below.
In Q3 2021, the gross profit margin is under great pressure, and the market expenses tend to re-enter the expansion range, which naturally worsens the income statement.
Although we will label Bilibili with various labels, such as the products closest to YouTube in China's Internet and the products with the most youth community attributes, etc.,We invest in an enterprise not only to invest in the "dream" he described to us, but also to invest in the profitability or cash flow reserve that the enterprise can bring us continuously. In order to improve our concentration in the market.
Then we have this question: Is the reversal of Q3 profitability short-term or long-term, and what other impacts will it have on future enterprises?
Look at the gross profit margin first. For a long time, the improvement of gross profit margin in Bilibili is indeed supported by the growth of advertising revenue. We make the following figure
In the above figure, the two curves show highly consistent phase inertia, especially after 2018, the proportion of advertising revenue has increased, and the gross profit margin has been rapidly improved. The reason is easy to understand. In the early days, the business model of Bilibili was mainly based on games, which made a considerable part of the revenue include the sharing of virtual products and content creators, and the quality of revenue was relatively low, while advertising revenue effectively optimized the above problems.
ButWe can also see that in Q3 2021, the proportion of advertising revenue is still at a high level, but the gross profit margin has dropped significantly. Why?
When we analyze operating costs, we find that revenue sharing costs and content costs are the biggest costs, which is understandable and we have warned before.After strengthening the copyright reserve capacity, Bilibili must bear the cash cost of purchasing copyright and the high cost of copyright amortizationNow this problem has appeared.
The cost of revenue sharing is somewhat strange. The proportion of this part is declining before 2020, and the reason is very simple. When the platform moves from early game revenue to diversified operation, it will reduce the proportion of this part of cost. But why does this proportion begin to enlarge after 2021?
The situation is clearer in the above picture. After entering 2021, The proportion of live broadcast and value-added revenue in Bilibili jumped, exceeding the proportion of advertising revenue. On the other hand, the proportion of game revenue also stabilized after several years of adjustment. Considering that the revenue sharing cost includes the fees paid to game developers, distribution channels (application stores) and payment channels, as well as the fees shared with anchors and content creators,When this part of income increases, it naturally means that the cost will increase accordingly.
When we explain the shrinking gross profit margin, we might as well summarize it as the trade-off between the cornerstone business and the new business represented by advertising revenue.
We summarize the shrinking gross profit margin at the financial level:
First, the proportion of value-added and game markets should be balanced with the proportion of advertising revenue. If the former accounts for too much, it may dilute the gross profit margin level;
Second, in the past few years, Bilibili has increased its copyright procurement efforts, hoping to build its second moat with copyright (if the first line of defense is a unique community culture), but it also brings great pressure to its subsequent profitability;
Third, if Bilibili wants to continuously improve its gross profit margin, it needs to run fast and steadily, and take into account the relationship between high-quality development and cost control. Previously, it was inevitable to invest in many fields by strong financing ability, which put forward higher requirements for subsequent operations.
After analyzing gross profit margin, we will look at market expenses.
Market cost is almost a common sensitive point of consumer Internet companies in China and even the whole world, and most business models are rude. Strong market cost is used to buy traffic, and then the platform endogenous or distributes traffic, resulting in traffic difference, that is, profit.
Many companies ran out here, turning user traffic into their own through early market expenses, and then cutting market expenses ushered in profits. However, many companies relied too much on market expenses. Once financing problems occurred, market expenses were forced to be cut, and the growth rate immediately declined, ushered in a vicious circle.
So what kind of bilibili belongs to? We also know that after the stock price falls, it will seriously affect the financing ability of enterprises (for example, the issuance of convertible bonds is based on the stock price as the value anchor). Will this affect the long-term value of Bilibili?
Although market cost has many functions, such as brand premium, diversion, etc., for Chinese Internet enterprises, the primary task of market cost is still to "pull new", which is to improve MAU in the mobile Internet cycle. There is a close relationship between market cost and MAU, as shown in the following figure
We fitted the MAU of Bilibili from Q1 2017 to the market cost, and obtained the above curve, whose correlation is as high as 0.8956, which shows that the above fitting line is effective.
In the above figure, we can find that in the last two quarters, the point distribution deviated below the fitting line, and in an easy-to-understand language,In the past two quarters, the conversion rate of market expenses to MAU has declined, which not only ensures the growth of MAU, but also overdrafts the market expenses and brings a burden to the income statement.
In the past year, supervision and the increase in the total size of the company's own users all mean the departure of user dividends.If an enterprise is still entangled in the expansion of user scale and wants to improve the efficiency of user acquisition with the attitude of "breaking the circle", it means that the market cost will easily fall into a situation of continuous high after that, will further overdraw the profitability of enterprises, which is certainly not good news that the capital market will start to consider the valuation of enterprises from a prudent perspective in 2022.
So what is my attitude towards the future of Bilibili?
Although I personally put forward various questions about enterprises in the previous analysis, if I want to summarize that I still give neutral and positive views on enterprises, the following are some of my thoughts.
For Bilibili's losses, some of them are inevitable problems belonging to the business model itself, while others can be gradually diluted or even diluted in the subsequent growth.
The scale of users in Bilibili is growing under the stimulation of strong brands, especially market expenses. But at the same time, we also found that the proportion of MPU has almost reached the bottleneck, That is to say, the growth of users who are actively willing to pay for consumption on the platform has actually been relatively slow, and this part is mainly concentrated in rewards and games. The increase in the proportion of this part of income we analyzed in the previous article is mainly due to the increase in single-user consumption expenditure, as shown in the following figure
In the declining weight of the game business, the value of live broadcast revenue is enlarged, and users' willingness to pay is rising. Combined with the fact that the total paying users are slowing down, that is,Bilibili's user stickiness in the "circle" has been formed, and even if the market cost is reduced, it may not have much impact, which is related to the unique cultural attributes and competitiveness of the platform.
When the MAU is amplified, Traffic scale overflows, and platform advertising effect should be enlarged. In Q3, advertising revenue increased by 110% year-on-year to 1.2 billion yuan, while iQiyi's advertising revenue in the current period was 1.7 billion yuan (down 10% year-on-year). Considering that iQiyi's user scale exceeds Bilibili (only its members exceed 100 million), it is conceivable that the ARPU of advertising revenue in Bilibili is very likely to approach or even exceed iQiyi.
Whether this means that advertisers are adjusting the video advertising strategy is still unknown, and we need to observe it dynamically. Only from this point of view, Bilibili may still have great potential for tapping advertising revenue. If this is the case, it can dilute some costs.
Everyone has different opinions on how to value Bilibili. However, I want to say that in the past, the market treated bilibili with the market sales rate (now TTM's market sales rate is still close to 8), which is a relatively high data. Under normal circumstances, when an enterprise enters a mature stage, it either lowers its revenue expectation, that is, lowers its market sales rate, or the enterprise needs to improve its profitability, so the price-earnings ratio becomes an important reference.
Nowadays, Bilibili is at a critical moment when the market sales rate is high, but the price-earnings ratio has not yet worked. For enterprises to either continue to maintain rapid growth or improve profitability, the market expectation can be adjusted accordingly. In 2022, I prefer the latter. In fact, Bilibili also has this potential.
These are my immature views on Bilibili. Welcome to clap bricks.
Disclaimer: The above content represents only the personal views of the poster and does not constitute investment advice on this platform.