Haitong International Expects BILIBILI-W Gaming Biz to Remain Weak This Year

Haitong International issued a report stating that BILIBILI-W (09626.HK) +1.300 (+0.945%) Short selling $388.44M; Ratio 23.909% recorded 1Q results in line with expectations. Advertising revenue was 3% above expectations; gaming revenue was 1% below expectations; value-added services were 2% below expectations; and adjusted operating margin met expectations. The US TP for Bilibili (BILI US) is set at USD21, with a rating of Outperform.The report noted that Bilibilis gaming business may continue to be weak this year. Revenue from "Three Kingdoms" is expected to decline YoY for the full year due to a high base effect, while the launch schedules for its Japanese and Korean versions have also been delayed. For new games, "Three Kingdoms: Hundred Generals" is expected to launch in July, while "Three Kingdoms: Royal Path" and "Shining Rumi" are planned for release in 4Q26. However, the broker believes these new titles will be insufficient to offset the decline of "Three Kingdoms."Mobile game revenue for 2Q26/FY26 is projected at RMB1.3 billion/RMB5.7 billion, down 17%/11% YoY. Supported by solid growth in live streaming and value-added services revenue, total revenue for 2Q26/FY26 is forecast at RMB7.8 billion/RMB32.7 billion, up 7%/8% YoY.However, the rapid growth in advertising revenue has not translated into margin improvement, mainly because the company expects AI-related capital expenditure to increase by approximately RMB1 billion in FY2026, with an estimated impact of around RMB500 million on the income statement. In addition, rising traffic has led to higher bandwidth costs, particularly amid cloud service price hikes. Gross margin for 2Q26 is expected to remain stable QoQ. Non-GAAP operating profit for 2Q26/FY26 is forecast at RMB660 million/RMB3.1 billion, up 15%/29% YoY, with operating margins of 8.4% and 9.6%, respectively.(ha/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-21 16:25.)