Rating: Cautiously Bullish | Target Price: HKD 135–160 (12-month, base-case fair value range) | Current Price: HKD 100.70 (close, 2026-10-30) | Margin of Safety: ~34% (base-case fair value floor of HKD 135 vs. current price) | Market cap HKD 42.31bn (~RMB 35.92bn, at 1 RMB = 1.1779 HKD, 2026-10-30)
Bilibili's stock price stands at HKD 100.70, down 64.2% from its 52-week high of HKD 281.0 and just above its 52-week low of HKD 99.5. This report's core judgment: the current price is close to being priced for "perpetual zero growth, with profitability below the already-realized FY2025 level" — reverse-engineered via DCF, the implied normalized free cash flow is only ~RMB 2.53bn per year, below the company's TTM adjusted net profit of RMB 2.95bn and about 18% below the sell-side consensus for FY2026 (~RMB 3.09bn). Yet the company is actually in the best fundamental condition since its IPO: FY2025 marked its first full-year GAAP profit (RMB 1.19bn), gross margin has risen sequentially for 16 consecutive quarters to 37.2%, and net cash of RMB 14.79bn accounts for 41% of market cap.
The drivers of this crash were primarily flow-related rather than a falsification of earnings: Tencent's 9.6% stake was fully exited via placement plus company share buybacks, a US$700m zero-coupon convertible-bond hedge unwound, and a Tech 100 index removal — a triple supply shock. Tencent's buyback is expected to settle around 2026-11-04, signaling the supply overhang is nearing its end. The decisive test comes over the next two quarters: whether the Q3 earnings report (expected mid-to-late November) shows advertising growth holding the "low-twenties" guidance and whether the game revenue decline narrows; and whether Three Kingdoms: Wangdao Tianxia launches on schedule in Q4 and delivers management's expectation of "game revenue turning YoY positive in Q4" (as of end-October, no official launch date had been confirmed — the single largest uncertainty in this thesis). If both materialize, the stock should recover toward the base-case fair value of HKD 135–160; if both fail, the bear-case fair value of HKD 78–95 is still underpinned by net cash and free cash flow. The probability-weighted expected return is roughly +40%, with asymmetric odds skewed to the upside — hence "Cautiously Bullish."
What changes over the next 6–12 months: Three events are moving from "overhanging risks" to "completed facts" — (1) Tencent's buyback of 13.591m shares settles around 2026-11-04, completing the exit of Tencent's direct stake (it retains US$200m of 2031 convertible notes exposure); the selling pressure that has weighed on the stock since September is fully transitioning into certainty; (2) ~20.387m repurchased shares await cancellation (~5% of share capital), and the 2026 buyback program still has ~US$182m of headroom to execute on a rolling basis; (3) the game pipeline shifts from "a single fading hit in Three Men" to a dense lineup of Lumie (launched 9/17) + Wangdao Tianxia (Q4) + Ragnarok 3 (2027).
Primary share-price driver: The advertising engine carries the greatest weight — 2026H1 ad revenue of RMB 5.72bn, +29% YoY, representing 37% of total revenue and having overtaken value-added services as the largest segment; management guides Q3 growth down to "low-twenties" and Q4 high-teens, and whether guidance is met — and by how much growth decelerates — directly determines the direction of earnings expectations. The gaming inflection is the second driver but is optionality in nature.
Demonstrable expectation gap: The market prices in zero growth vs. a TTM adjusted net profit of RMB 2.95bn growing +39.7% YoY in 2026H1. Closing the gap requires evidence: Q3 ad growth ≥21%, game revenue decline narrowing to single digits, and Wangdao Tianxia confirmed for Q4. Falsification conditions are equally clear: ads below 15% for two consecutive quarters, game revenue failing to turn positive in Q4, and a delayed 2027 pipeline. Opportunity assessment dimensions (changes/drivers/gap/catalysts) with evidence grade B (primarily primary-source earnings releases and announcements, with some guidance relayed via sell-side channels).
Key evidence:
Fourteen consecutive quarters of ≥20% YoY growth is rearview-mirror statistics — per management's own guidance, that streak will most likely break in Q4. This report does not take "20% in perpetuity" as a premise; instead it models H2 deceleration to ~15%: FY2026 ad revenue of ~RMB 11.6–12.0bn (+15% to +19%). The supporting factors are structural: AI-powered ad-buying tools (automated ads already exceed half of penetration; AI-generated creatives outperform human-made ones on click-through rates), multi-scenario monetization across search/playback pages/PC/smart TV (H1 revenue +50%), and expansion into new verticals such as home furnishing and footwear/apparel. The reverse risk is that ad budgets are pro-cyclical: if macro weakens, small-share platforms have weak bargaining power and get cut first — Q3 ad growth falling below 20% is the warning line; below 15% falsifies this thesis.
Key evidence:
Three layers of evidence point the same way: (1) A reverse DCF (12% cost of equity) solves for an implied normalized FCFE of only ~RMB 2.53bn/yr at the current price — below this report's normalized midpoint of ~RMB 3.0bn (range RMB 2.5–3.5bn) and below TTM adjusted net profit of RMB 2.95bn — the market is not even paying for the profitability already realized in FY2025; (2) Zero-growth EPV is ~HKD 111.5/share (estimate; this report's own calculation: normalized FCFE RMB 3.0bn ÷ 12% + net cash of HKD 41.5), about 11% above the current price — meaning the growth option is priced at negative value: the market pays for no growth whatsoever, and fails to fully pay even for zero-growth value; (3) P/B of 2.3x sits at the 11th percentile of the past 5 years; EV/FY2025 FCF is only 3.2x (~4.3x on 2026E FCF of ~RMB 4.9bn). Two measurement caveats must be acknowledged: first, the GAAP P/E (TTM) of 23.9x at its historical low percentile reflects early-stage earnings ramp-up plus drag from non-recurring items, and is for reference only, not a headline; second, this conclusion is discount-rate sensitive — if China ADR risk premia push the cost of equity to 13.5%, EPV falls to ~HKD 104, roughly equal to the current price, and "undervalued" collapses into "reasonably cheap." Measured against GAAP (sell-side 2026E attributable net profit of ~RMB 1.7–2.2bn), market pricing is not significantly below GAAP fundamentals either — the real support for the undervaluation call is cash-flow quality (OCF consistently above book profit) and a nearly free growth option. Two consecutive quarters of negative adjusted net profit growth, or FCF turning negative, would falsify this thesis.
Key evidence:
The math hurdle is clear: with a Q4 base of RMB 1.54bn, if Q3 lands at ~RMB 1.39bn (flat QoQ), Q4 needs +10.8% QoQ to turn YoY positive — the increment can only come from new games. The uncertainty is equally clear: as of 2026-10-31, no official launch date has been announced for Three Kingdoms: Wangdao Tianxia (third-party channels show "launch time TBD," with test schedules twice postponed); if it launches only in December or slips to 2027, the Q4 turnaround falls through; Lumie is a casual simulation title whose post-launch-month decay curve is unproven. This thesis is treated as an "option": success means the game segment returns to growth in 2027 (a modeling scenario of RMB 1.5–2.5bn in potential incremental annual gross billings across the pipeline); failure means Three Men's decay dominates and game revenue keeps declining into 2027. Verification checkpoints: launch-date confirmation before November (leading indicator), first-month iOS grossing-chart rank, and whether Q4 game revenue exceeds RMB 1.54bn.
Key evidence:
Cash generation has long outpaced book profit: FY2025 OCF/attributable net profit ~6.0x, FCF/net profit ~5.6x (OCF positive even in loss years), and 2026H1 OCF of RMB 2.95bn was still 2.3x adjusted net profit. But two discounts must be called out: (1) Non-GAAP adds back SBC in full — FY2025 SBC of RMB 1.17bn equals ~98% of GAAP attributable net profit and 45% of adjusted net profit; "of the adjusted profit, RMB 1.17bn comes from pretending equity incentives don't exist," with GAAP net margin only 3.6%–4.3%; (2) 2026H1 OCF fell -10.3% YoY (RMB 3.29bn a year earlier), and combined with full-year guidance of RMB 1bn in AI capex, the FCF conversion trend is deteriorating — the earnings improvement is real, but "unlimited cash-flow validation" is an exaggeration. Two consecutive quarters of sequential gross-margin decline, or FCF/adjusted net profit persistently below 1, would falsify this thesis.
Key evidence:
The exit path for Tencent's 9.6% direct stake is fully locked: September's secondary placement of 26.375m shares + company buyback of 13.591m shares (US$200m, multilaterally netted against the note subscription with no net cash outflow), with settlement imminent. 2026 announced buybacks total ~US$418m. But the other side must be presented honestly: until cancellations complete, net share count is still rising — shares outstanding rose from 414.7m at end-2025 to 425.0m at the late-October EGM record date (+2.5%, driven by ongoing RSU vesting), and in September another 4.58m RSUs with no performance targets were granted (1.09% of share capital, vesting 2027–2032). The "share-count shrinkage channel" only holds once cancellations complete and new grants slow; if Tencent's US$200m notes were fully converted, they would correspond to another ~10.11m shares (~2.3%) of potential supply — though below HKD 155.79 (+55% vs. current price) this poses no realistic dilution. A delayed November settlement or stalled cancellations (no progress by early December) would be this thesis's warning line.
| Metric (RMB bn) | FY2023 | FY2024 | FY2025 | 2026Q2 (latest quarter) |
|---|---|---|---|---|
| Revenue | 22.53 | 26.83 | 30.35 | 7.94 |
| YoY | +2.9% | +19.1% | +13.1% | +8.2% |
| Attributable net profit | -4.82 | -1.35 | 1.19 | 0.34 |
| Adjusted net profit (Non-GAAP) | -3.41 | -0.04 | 2.59 | 0.70 |
| Gross margin | 24.2% | 32.7% | 36.6% | 37.2% |
| Net margin | -21.4% | -5.1% | 3.9% | 4.3% |
| Operating cash flow | 0.27 | 6.01 | 7.15 | — (2026H1: 2.95) |
| Free cash flow | 0.08 | 5.55 | 6.63 | — |
| Cash + cash-like assets | — | 16.54 | 24.15 | 24.30 (as of 2026-06-30) |
| Interest-bearing debt | — | 4.84 | 9.64 | 9.51 (as of 2026-06-30) |
| Liabilities/assets ratio | — | — | 62.2% | 62.5% (as of 2026-06-30) |
Note: Adjusted net profit is the company's Non-GAAP basis (full add-back of SBC, etc.); FY2025 recurring net profit excluding fair-value losses on listed investments and FX losses was ~RMB 1.37bn, within 15% of the attributable figure; free cash flow = OCF − purchases of property & equipment (the company does not disclose an FCF basis); liabilities/assets ratio = total liabilities / total assets (including operating liabilities such as deferred revenue). 2026Q2 line items are derived from the interim announcement minus Q1.
Reasons for metric changes (YoY ≥ ±20% items, with company explanations): (1) Ad revenue FY2025 +22.8%, 2026H1 +28.6% — attributed by the company to "improved advertising product supply and enhanced ad effectiveness," mainly AI-driven ad buying and multi-scenario monetization; (2) Mobile games FY2025 +14.0% → 2026H1 -12.8% — attributed to Three Men's "high base + entering a stable, mature life-cycle stage"; (3) Net profit FY2025 turned positive (from -1.35 to +1.19bn) — "first full-year GAAP profit," driven by gross-margin improvement + expense control; (4) Short-term investments +138% to RMB 6.45bn at end-FY2025 — deployment of 2030 notes proceeds (US$678m net) into wealth-management products; (5) Short-term loans + current portion of long-term debt +209% to RMB 4.86bn — issuance of 2030 notes to refinance old convertibles; (6) Net property & equipment +198.7% from the start of the year to RMB 2.08bn as of 2026-06-30 — AI server capex (70–80% of the full-year RMB 1bn target already deployed); (7) R&D expenses 2026H1 +13% — "increased server depreciation-related expenses."
Q2 revenue was RMB 7.94bn (+8.2%), with advertising at RMB 3.13bn (+27.8%) overtaking value-added services for the first time as the largest revenue segment; games RMB 1.39bn (-13.7%), continuing the decay off Three Men's high base; value-added services RMB 2.97bn (+4.6%); IP derivatives RMB 450m (+2.3%). GAAP attributable net profit was RMB 340m (vs. ~RMB -300m a year earlier, turning positive), adjusted net profit RMB 700m (+25%), gross margin 37.2% (the 16th consecutive quarter of sequential improvement). On the user side: MAU 373m, average daily time spent ~116 minutes (company-disclosed basis, total time +17% YoY), monthly paying users 33.9m (+7%), premium members 25.7m (+9%, ~80% annual/auto-renewal subscriptions). The operating picture of "ads carrying growth, games dragging, margins climbing" is clear; the stock rose over 3% on results day in Hong Kong, but this was fully reversed by the September supply shock from the Tencent placement–convertible combination. On whether the market has fully priced this in: sell-side analysts trimmed earnings post-results but kept Buy ratings (Morgan Stanley target price cut from US$31 to US$27, with 2026–28 EPS cut 3%/9%/4%), yet the stock then fell another 17% on its own — indicating market pricing is already below even the most pessimistic sell-side view (October's lowest target price of US$21 still implies over 60% upside from the current price). This divergence — a stock more pessimistic than every sell-side analyst — is precisely the starting point of this report's expectation-gap judgment.
Model in brief: An asset-light content community platform — nearly 3 million content creators (UP 主) supply PUGV medium-to-long videos, monetized via four engines: advertising, value-added services (Premium membership / live streaming), game joint operations and self-developed titles, and IP derivatives. Revenue has high recurring characteristics (about 80% of Premium memberships are annual/auto-renewal subscriptions; advertising is a hybrid of brand contracts and performance-based), while games are transaction-flow driven. The company holds strong bargaining power over upstream creators (distribution entry points + diversified monetization tools), medium bargaining power over advertisers (1.3% share of the overall ad market; many substitutable platforms), and medium-to-weak bargaining power over game developers, but its exclusive-distribution positioning in the ACG (anime/comic/game) community is irreplaceable.
Cash content of earnings: This is Bilibili's most outstanding financial strength. OCF/attributable net profit for FY2025 is about 6.0x (OCF was positive even in the loss-making FY2023/FY2024 at RMB 2.7 / 6.01 billion respectively), and FCF/net profit about 5.6x; in 2026H1, OCF of RMB 2.95 billion was still 2.3x adjusted net profit. Drivers: non-cash SBC (about RMB 1.1–1.2 billion annualized) + continuous inflow of deferred revenue (FY2025 +RMB 860 million; the prepayment model lets working capital fund growth rather than tie up cash). Reverse-metric check: The company's self-reported Non-GAAP adds back all SBC, an aggressive approach — of FY2025 adjusted net profit of RMB 2.59 billion, RMB 1.17 billion assumes "stock incentives don't exist"; recurring net profit after removing fair value changes and FX effects is about RMB 1.37 billion (+14.8% deviation vs. attributable net profit, under the 15% warning threshold). True "shareholder-basis" profitability lies between GAAP RMB 1.19 billion and adjusted RMB 2.59 billion; this report anchors valuation on cash flow rather than profit.
Return on capital: FY2025 ROE about 7.7% (first year of turning positive, still ramping); ROIC estimated on operating profit about 4.4% — the reading is dragged down by RMB 14.79 billion of net cash; excluding net cash, return on operating capital is significantly higher, but the absolute level is still below the 15% moat threshold; "high returns" remain to be verified as net margin continues to climb.
Capex quality: FY2025 purchases of property and equipment were only RMB 510 million, 0.23x of D&A (historically an under-investment profile); 2026 shifts to AI servers (full-year target of RMB 1 billion, 70–80% deployed in H1, PP&E +199% half-yearly) — growth-oriented rather than maintenance capex, with the payback period to be observed. No maintenance/growth split disclosed.
Red flag list: ① Reliance on a single game hit (San Mou supports over half of the game segment; 2026H1 -13%); ② reliance on iOS as a single distribution channel (acknowledged in the annual report's risk factors); ③ the combination of low-coupon convertible bonds + placements + buybacks used consecutively in 2025 and 2026 — rolling financing instruments; ④ elevated SBC, plus 4.58 million RSUs granted in September without performance targets.
Consistency between words and deeds: pragmatic, largely delivered. Verifiable commitment-delivery record: FY2024 annual report outlook of "increasing advertising investment and advancing toward sustainable profitability" → FY2025 advertising +23% and first-ever full-year GAAP profit of RMB 1.19 billion — delivered; 2026Q1 earnings call commitments on gross margin improvement and high adjusted net profit growth → Q2 gross margin 37.2%, adjusted net profit +25% — delivered; Q2 earnings call CFO statements that "game revenue will return to growth in Q4" and "full-year AI capex of RMB 1 billion" → pending verification (the former depends on Wang Dao Tian Xia's release date; the latter already 70–80% deployed in H1). The company does not give quantitative revenue guidance and builds credibility via quality metrics — a conservative style with no history of exaggeration.
Shareholder friendliness: neutral-to-friendly (buybacks hedge dilution; no cash dividends). Never paid a dividend, and the annual report explicitly states "no dividend plans for the foreseeable future" (hence deviating from Corporate Governance Code F.1.1); but buybacks are substantively positive: the 2024 US$200 million plan was completed on schedule, a new US$300 million two-year plan was approved in June 2026 (US$118 million executed by end-August), US$300 million repurchased in September (hedging note dilution + absorbing Tencent's exit), with about US$182 million remaining. The cost: debt-funded buybacks in both 2025 and 2026, plus SBC of about RMB 1.2 billion annualized continuously diluting — a race between buybacks and grants, with net share count not yet shrinking (see C5).
Risk signals: Chen Rui serves concurrently as Chairman + CEO (deviating from Code provision C.2.1; voting power 42.3%); Tencent has retreated from strategic shareholder to holder of a US$200 million convertible bond; September RSU grant carries no performance targets; Xu Yi's 2.9 million shares placed in a prepaid variable forward with share-lending arrangement. No founder sell-downs on record; Li Ni and Xu Yi signed irrevocable commitments to vote in favor of the EGM resolutions.
| Segment | FY2025 Revenue (RMB 100M) | Share | FY2025 YoY | 2026H1 YoY | Business Logic in One Line |
|---|---|---|---|---|---|
| Value-added services (Premium / live streaming / charging) | 119.3 | 39.3% | +8.4% | +4.2% | Subscription-based; 80% annual/auto-renewal; improving live-streaming margins |
| Advertising | 100.6 | 33.1% | +22.8% | +28.6% | High-margin performance + brand + Huohuo; AI-boosted ad targeting; expansion in five vertical categories and new industries |
| Mobile games | 63.9 | 21.1% | +14.0% | -12.8% | Mixed licensing + self-development; San Mou in mature-stage decline; dense 2026H2–2027 pipeline |
| IP derivatives and others | 19.7 | 6.5% | -3.3% | -1.0% | E-commerce + offline events (BW/BML, 400k attendees); small share |
The company does not disclose segment gross margins, so "the main profit segment" cannot be quantified. Qualitative judgment: advertising and mobile games are high-margin revenue (games carry high pass-through margins after channel revenue-share; advertising has extremely low marginal cost), while live-streaming tipping within value-added services requires revenue-share with streamers/guilds and has a lower margin structure — advertising, the second-largest by revenue share, is most likely the largest gross-profit contributor, and its +28.6% growth is amplifying that position. The core tension between segments: a race between the growth engine (advertising) and the declining engine (games); in 2026H1, advertising's incremental revenue (+RMB 1.27 billion) was enough to cover the game decline (-RMB 430 million), with total revenue still +7.5%.
Accounting red flags: ① Non-GAAP adds back all SBC (medium severity) — SBC is a recurring expense at 98% of GAAP net profit; excluding it warrants a discount on earnings quality (already addressed in C4/E1); ② game revenue recognition relies on significant accounting estimates (medium severity) — revenue is recognized on a straight-line basis over time based on paying players' "average play duration"; changes to the duration parameter directly affect revenue pacing (FY2025 annual report Note 2(c)); ③ passive consolidation of investee companies via non-cash transactions (low severity) — stake rose from about 29.9% to over 50%, adding RMB 93 million of goodwill; impairment to be tracked; ④ 2026H1 accounts receivable +32.6% outpacing revenue +7.5% (low severity) — 82% of receivables within 3 months, impairment provision actually declined; no substantive evidence yet but placed on watch.
Cross-period consistency: ① Gross margin rising for 16 consecutive quarters from 24.2% → 32.7% → 36.6% → 37.2%, with consistent attribution across periods (improved monetization efficiency + relatively stable platform operating costs); ② game growth of +39.5% → +14.0% → -12.8% tracked San Mou's life cycle (spike then fade), with consistent company explanations; ③ OCF consistently ahead of book profit (SBC + deferred revenue), consistent across three years; ④ the "convertible bond + concurrent buyback" combination used three times in 2023/2025/2026, with a self-consistent company narrative (treated as debt financing + anti-dilution arrangement; the 2026-09 announcement explicitly states proceeds used for concurrent repurchases); ⑤ R&D expenses cut consecutively from 4.47 → 3.69 → 3.53 billion, then up +13% in 2026H1 (server depreciation), corroborating AI capex deployment. Conclusion: Based on the financials extracted for this review, no systematic accounting-aggression traces were found; cross-period explanations are consistent. The main reservations are the looseness of the Non-GAAP definition and game revenue recognition estimates.
Current market data: Share price HK$100.70 (2026-10-30 close), total shares 420,134,746 (2026-09-30 monthly return; 425.0 million shares at the late-October EGM record date), market cap HK$42.31 billion ≈ RMB 35.92 billion; 52-week range HK$99.5–281.0, current price -64.2% from the 52-week high. Multiples and percentiles: PB 2.3x (11% percentile over 3 years / 11% over 5 years); PS (FY2025) 1.18x; adjusted PE (TTM) 12.2x, FY2026E forward PE 11.6x (consensus RMB 3.09 billion), PEG about 0.60; EV/Sales 0.70x; EV/FCF 3.2x (FY2025) / about 4.3x (2026E). GAAP PE (TTM) of 23.9x sits at the historical 0% percentile — the company only turned profitable in 2025, so this percentile is mechanically distorted, for reference only, not a cheap/expensive signal; this report anchors primarily on cash flow and adjusted metrics.
What the market is already pricing in: Reverse DCF (12% cost of equity, perpetuity) back-solves an implied normalized FCFE of about RMB 2.53 billion/year at the current price — implying the market believes Bilibili's operating business will never grow again, and that profitability will fall another 14% below TTM adjusted net profit of RMB 2.95 billion; converted to a profit basis, this approximates "FY2028 adjusted net profit of RMB 2.2 billion, below the RMB 2.59 billion already achieved in FY2025." One-line contrast: the current price requires the company to "peak and decline in profit," while reality shows 2026H1 adjusted net profit +39.7%, advertising at ≥20% for 14 consecutive quarters, and a dense game pipeline launching from Q4. The sources of the pessimistic pricing are identifiable and mostly capital-flow-driven: Tencent's placement and CB hedge flows (settling after 11-04), index removal, China-stock risk premium — if the November Q3 report shows ad deceleration plus game silence, the market pricing is correct and this judgment is falsified.
Three-tier value (EPV): ① Asset value (floor) = net cash of RMB 14.79 billion ≈ HK$41.5/share (2026-06-30 basis; pro-forma net increase of about RMB 2.6 billion equivalent after the September note transactions), 41% of market cap; ② zero-growth EPV about HK$111.5/share (estimate; this report's calculation: normalized FCFE RMB 3.0 billion ÷ 12% + net cash; normalization chain: adjusted net profit less cash cost of SBC, plus net D&A minus maintenance capex, less one-off deferred revenue contribution; range RMB 2.5–3.5 billion); ③ growth option worth about -10.8% of the current price (this report's actual calculation; current price at about a 10% discount to zero-growth EPV) — the market is paying nothing for any growth ("pricing only for zero growth" holds). Sensitivity: cost of equity at 11%/13% implies EPV of about HK$118/106; at 13.5% about HK$104, roughly equal to the current price — the undervaluation conclusion is sensitive to the China-stock risk premium; this is the first dependency of this judgment.
Three scenarios and odds (exit valuations all use 2028 adjusted net profit as numerator, two-year discount, plus net cash):
| Scenario | Probability | Fair Range (HK$) | vs. Current | Key Assumptions |
|---|---|---|---|---|
| Bear | 32% | 78–95 (midpoint 86.5) | -7% to -23% (midpoint -14.1%) | New game pipeline silent, advertising falls to single digits, discount rate stays at 13.5%+; FY2028 adjusted net profit cut to about RMB 2.2 billion × 10x |
| Base | 48% | 135–160 (midpoint 148.7) | +34% to +59% (midpoint +47.7%) | Games turn positive in Q4, advertising holds 15–20%, moderate 2027 pipeline delivery; FY2028 adjusted net profit about RMB 4.0 billion × 12x |
| Bull | 20% | 200–230 (midpoint 225.9) | +99% to +128% (midpoint +124.3%) | Lumi scales globally + Wang Dao Tian Xia becomes a hit + AI ad efficiency beats expectations; FY2028 net profit about RMB 5.5 billion × 15x |
Basis for the base case's 12x exit PE: NetEase forward about 13.9x (pure-game cash cow in steady state), Tencent forward about 12.0x (platform leader), Kuaishou about 5.7x (in profit-downgrade phase) — Bilibili takes the middle of the three, below both cash cows, reflecting gaps in scale and earnings quality; the bull case at 15x aligns with the upper end of NetEase/Tencent TTM; the bear case at 10x is a stressed multiple after profit downgrades. Bear case note: The most pessimistic external sell-side target price (J.P. Morgan downgrade to US$21 on 2026-10-16 ≈ HK$165) is still above this bear case's upper bound — because all sell-side firms maintain Buy/Neutral ratings and most target prices were set before the crash and lag; this bear case is constructed on independent stress assumptions (pipeline falsified + single-digit advertising + high discount rate), is not comparable to sell-side promotional target prices, and their boundaries are not adopted. The base case's probability-weighted expectation is about +40%, with downside supported by net cash of HK$41.5/share and annualized FCF in the RMB 5 billion range — the odds are asymmetrically skewed to the upside.
Own forecasts vs. guidance vs. sell-side consensus:
| Basis | FY2026 Revenue | FY2026 Adjusted Net Profit | FY2027 Adjusted Net Profit |
|---|---|---|---|
| This report | RMB 32.2–33.2 billion (+6% to +9%) | RMB 2.9–3.2 billion | RMB 3.5–4.3 billion |
| Management (earnings calls / sell-side paraphrase) | No quantitative guidance; Q3 advertising low-teens, Q4 high-teens; games flat QoQ in Q3, turning positive in Q4; AI capex RMB 1 billion | — | — |
| Sell-side consensus (Huachuang 2026-09-22 et al.) | — | RMB 3.09 billion | RMB 3.93 billion |
This report takes near the lower end of consensus, reflecting ad downshift and uncertainty over new game release dates; next quarter's report will be reconciled against these figures.
Conclusion: Undervalued; target price HK$135–160 (base case fair value), safety margin about 34%. Quality (gross margin ramp, cash content, community moat) and price (-64% drawdown, zero-growth pricing) diverge significantly; but "being sure it's cheap" is not the same as "being sure it will rise" — the recovery requires evidence from the November Q3 report and Q4 game release dates, and the valuation ceiling stays pressured if the China-stock risk premium does not recede (at a 13.5% discount rate it is only "reasonably cheap").
Note: Bilibili's PE-TTM is on a GAAP basis (early earnings ramp; the elevated reading is for reference only), with its adjusted multiple at 12.2x; Kuaishou's PE is at its own historical 0% percentile amid 2026 profit downgrades.
Industry size. Bilibili spans three tracks. ① China's gaming market: 2025 actual sales revenue of RMB 350.789 billion (+7.68%), of which mobile games RMB 257.076 billion, mini-program games RMB 53.535 billion (+34.39%), ACG (二次元) mobile games RMB 28.281 billion (-3.64%); users 683 million (+1.35%); in 2026H1 the overall market accelerated to RMB 188.45 billion (+12.17%); self-developed games overseas generated USD 20.455 billion in 2025 (+10.23%) and +30.22% in 2026H1 (sources: Game Publishing Committee of the China Audio-Video and Digital Publishing Association / Gamma Data "2025 China Gaming Industry Report", Xinhuanet). The 2022–2025 three-year CAGR is about 9.7%; with normalized license approvals (1,766 licenses issued in Jan–Oct 2026, ~180 per month on average) plus the "15th Five-Year Plan" for the first time incorporating online games into the national five-year plan and encouraging overseas expansion, the central growth rate for the next 3–5 years is expected to be mid-to-high single digits up to double digits. ② China's internet advertising: RMB 793.08 billion in 2025 (+4.6%, QuestMobile); the overall market has entered low-single-digit stock growth, with share redistribution among platforms as the main theme; Bilibili's FY2025 advertising revenue was RMB 10.06 billion, a share of ~1.3%, growing 5–7x faster than the overall market, with its share trending upward. ③ Mid-to-long-form video / PUGV content communities: no independent authoritative TAM estimate exists (not obtained); a proxy variable is total user time across the internet — mobile internet MAU has peaked at 1.276 billion (QuestMobile, 2025.12), while per-capita monthly time is still growing (+5.4%); the industry's growth logic has shifted from "user acquisition" to "time spent and monetization depth."
Value chain and value distribution. Upstream: nearly 3 million content creators earning income (creators with 1,000+ followers +30%, average income per creator +24%, 2026Q1) and game developers/IP holders; midstream: the platform layer (Bilibili's PUGV community distribution + self-produced OGV + live streaming + e-commerce IP); downstream: advertisers (top five verticals: gaming, internet services, consumer electronics & appliances, e-commerce, automotive), gamers, membership users, e-commerce consumers. Gross profit mainly accrues to the platform layer: Bilibili's largest cost item is revenue-sharing costs (RMB 3.04 billion in a single quarter of 2025Q3, ~62% of operating costs); it has strong bargaining power over long-tail creators but must keep conceding to top creators and exclusive content; its bargaining power over advertisers is generally weak (1.3% share, ample substitute platforms), and it is improving conversion-based bargaining power through performance advertising + AI delivery tools.
Supply-demand and competitive structure. Demand side: the user-time market is broadly oversupplied — short-video MAU is 1.026 billion, with Douyin + Kuaishou accounting for nearly 70% of short-video industry time (QuestMobile); monthly per-capita short-video viewing is ~59.7 hours vs. Bilibili's 116 minutes per day per user; gaming users are stagnant (+1.35%), with revenue growth relying on ARPU and new title supply. Supply side: creators keep expanding (AI lowers creation barriers), license approvals are increasing (+23.2% YoY in the first three quarters), and platform entry barriers are extremely high (20 years of community culture, two-sided network effects). Competition: on the time-spent front, head-to-head with Douyin/Kuaishou (whose MAU is 2–3x Bilibili's); on the advertising front, brand budgets are siphoned by efficiency platforms and diverted by WeChat Channels' closed loop; on the gaming front, user-acquisition costs are high and hit rates are uncertain. Concentration: short video is a duopoly (Kuaishou alone with RMB 81.5 billion in advertising ≈ 10.3% of the national total); long video has the "Big Four" of iQIYI/Youku/Tencent Video + Bilibili (iQIYI FY2025 revenue RMB 27.29 billion, declining continuously); in gaming, Tencent + NetEase together account for over 40% of the market (NetEase games and related value-added services RMB 92.1 billion ≈ 26%); Bilibili's share of both the advertising and gaming markets is only 1–2% — a niche challenger — but its growth rate and share trend are rising. Substitution threats: short video / live streaming (the largest substitute), free micro-dramas, mini-games, AI-generated content and AI companion apps (AIGC-native app MAU 270 million, +536.8%).
AI demand chain (a structural demand-side variable, already quantified): Driving variables — the explosion of AI-native apps (MAU 270 million, +536.8%, the fastest-growing segment across the internet) has made Bilibili a natural hub for AI developers and technical content: on-platform AI content viewing time +44% QoQ, search volume for "AI agents" and "AI entrepreneurship" +500% YoY; on the monetization side, AI automated advertising penetration exceeded 50% within 2025, AI-generated thumbnails outperform human-made creatives in CTR, and revenue from AI advertisers doubled YoY in 2026H1. Penetration is expanding from brand advertising to all performance scenarios (search / playback pages / PC / OTT). Results already realized: advertising revenue share ~1.1% → 1.3%, 14 consecutive quarters of ≥20% growth. This chain is an "efficiency-type inflection" rather than a "step-change in per-unit usage volume"; in magnitude it does not yet constitute an industry re-rating, so the valuation anchor is not switched.
Cycle and regulation. The gaming industry is in an up-cycle (2025 +7.68%, 2026H1 +12.17%, normalized license approvals + national plan endorsement + overseas expansion encouragement); the overall advertising market is in a weak recovery (+4.6%); short video is mature, while mid-to-long-form video communities represent a structurally defensive position. Leading indicators: monthly license issuance, Gamma Data's monthly gaming revenue YoY, QuestMobile's quarterly advertising scale, and Bilibili's consecutive quarters of gross margin improvement and advertising growth. The regulatory direction is broadly favorable (license supply + overseas strategy); remaining constraints are minor-protection regulation (on 2026-09-30 the Shanghai Cyberspace Administration's special guidance meeting named Bilibili among 17 platforms regarding prevention of seven categories of psychological risks to minors; minor-mode time/function restrictions are tightening) and advertising/algorithm compliance, with content compliance costs rising rigidly; live-streaming rectification is a sector-specific, partial negative.
Peer benchmarking (Bilibili figures per its financial reports; peers per their respective FY2025 results + market cap as of 2026-10-30):
| Company | Revenue (FY2025, RMB bn) | Revenue growth | Gross margin | ROE | Market cap (2026-10-30) | Key differences vs. Bilibili |
|---|---|---|---|---|---|---|
| Bilibili | 30.35 | +13.1% | 36.6% | 7.7% | HK$42.31 bn | Mid-to-long-form video community + gaming + advertising triple engines, first year of profit ramp |
| Kuaishou-W | 142.8 | +12.5% | ~55% (secondary source) | 26.3% | HK$114.1 bn | Short-video duopoly, per-DAU monetization several times Bilibili's, but 2026 profit cut (adjusted net profit guidance -15~18%) and RMB 26 bn AI capex drag |
| Tencent Holdings | 751.77 | +13.9% | ~56% (secondary source) | 21.1% | HK$3,487.9 bn | Monopoly-level all-business leader; Bilibili's ad share is a rounding error to it |
| NetEase | 112.6 | +6.9% | 64.3% | 22.6% | HK$565.7 bn | Pure gaming R&D cash cow (net margin ~30%); Bilibili's gaming scale is less than 1/14 of it |
| iQIYI | 27.29 | -6.6% | ~16.5% | -1.5% | — (ADS US$0.833) | Asset-heavy IP + membership model declining year after year; Bilibili's asset-light UGC model is a generational difference, with ad revenue already nearly 2x iQIYI's |
The company's industry position: the absolute leader and de facto monopolist of the mid-to-long-form video PUGV community — FY2025 average MAU 368 million, average DAU ~112 million (estimated basis, industry research citing company disclosures; Q4 ~113 million, +10% YoY), DAU/MAU ~31% (estimated), daily time spent ~108–119 minutes (estimated range), the highest in the long-video camp, average user age 26, 12-month formal membership retention ~80% (formal members 299 million). Its standing across the three tracks is tiered: #1 mindshare in content communities; challenger in advertising (1.3% share, growing 5–7x faster than the market, trend upward); niche player in gaming (~1.8% share, strong positioning in ACG publishing, currently in a trough of its product cycle). Moat sources: 20 years of community culture and creator ecosystem, young highly sticky users, low-cost UGC content supply. Note on market-position basis: Bilibili describes itself as "the iconic brand and leading video community for the young generation in China," consistent with third parties' (QuestMobile, etc.) definition of the "mid-to-long-form video community" segment — no ranking conflicts.
User assets: MAU 373 million (2026H1), average DAU 112 million (FY2025, Q4 113 million / +10%); daily time spent ~116 minutes (2026H1 company disclosure; FY2025 108 minutes, FY2024 102 minutes), total time spent +17% YoY; formal members (who passed the 100-question community exam) 299 million, 12-month retention ~80% — time spent and retention are the two indicators that best represent community stickiness, both on an upward trajectory. For comparison: Douyin/Kuaishou monthly per-capita short-video time is ~59.7 hours (≈120 minutes/day) with MAU 2–3x Bilibili's; Bilibili maintains comparable per-user time with one-third the user base, but the per-DAU monetization gap is large (this report estimates Bilibili FY2025 total revenue/DAU at ~RMB 22.7/month, on an estimated DAU basis, while Kuaishou's per-DAU ad revenue is several times Bilibili's) — monetization rate, not user assets, is Bilibili's weakness, and precisely for this reason the advertising business has 5–7x market-rate growth headroom.
Paying users and ARPPU: average monthly paying users 33.9 million (2026H1, +7%), paying ratio (MPU/MAU) ~9.1%; Premium members 25.7 million (+9%, ~80% annual subscriptions/auto-renewal). The company does not disclose ARPPU; this report estimates FY2025 (VAS + gaming revenue) / average monthly paying users at ~RMB 44.9/month. Deferred revenue (current liabilities) RMB 4.64 billion (2026-06-30; end of FY2025 RMB 4.66 billion, +22.6%) — the "gross bookings reservoir" of the prepaid model, whose growth precedes revenue recognition and is one of the leading indicators for the gaming and subscription businesses; note that there is a basis difference between gaming "gross bookings" and "recognized revenue" (amortized across periods based on paying players' average playtime).
Gaming pipeline and life cycle (the "product cycle" decider for a content platform):
| Product | Status / Release window | Positioning |
|---|---|---|
| Three Kingdoms: Hero's Journey (published SLG) | Live (launched 2024-06, two-year anniversary), consistently iOS top-5 grossing across S8–S15 seasons | Cash cow, decaying in maturity |
| Escape from Duckov (self-developed, premium/buy-to-play) | Live (launched 2025-10, 3 million copies sold in 3 weeks) | One-time revenue + IP stock |
| Three Kingdoms: Hundred Generals Card Battle (published card game) | Live (launched 2026-07; July version LTV doubled vs. April) | Mid-small-scale supplement |
| Shine! Rumi (self-developed simulation) | Global launch 2026-09-17; per Sensor Tower, became the company's #2 mobile game revenue in September itself | One of the main Q4 incremental drivers; retention to be validated |
| Romance of the Three Kingdoms: The Royal Way (Koei-licensed SLG) | Planned 2026Q4; as of end-October not officially scheduled (tests postponed twice) | The biggest variable for Q4 gaming inflection |
| Ragnarok 3 (licensed MMORPG) | License approved, first test 2026-08, targeting 2027 | 2027 follow-on driver |
| Fire Phoenix Tactics RPG (self-developed) / Mistbound (licensed) | Announced at BW, 2027 | Pipeline reserve |
Overall assessment: cautiously bullish, confidence 0.58, time horizon 12 months. Bilibili's fundamental quality is at its best stage since listing (first full-year profit, 16 consecutive quarters of gross margin improvement, FCF of RMB 6.6 billion, net cash at 41% of market cap), while the price has fallen to its 52-week low, pricing in zero growth or even a "profit peak and decline" — the divergence between quality and price is the foundation of this report's bullish stance. Why "cautious": ① the valuation conclusion is sensitive to the China ADR risk premium (at a 13.5% discount rate it is only "reasonable-to-cheap"); ② both key validations (Q3 advertising, Q4 gaming scheduling and inflection) have not yet materialized, and management has already downgraded its own advertising guidance; ③ net share count has not actually contracted yet, and SBC and convertible bonds form a medium-term dilution overhang. Strategically, the current price offers ~34% margin of safety against the base-case fair value of HK$135–160 and a probability-weighted expected return of ~+40%, suitable for staged accumulation (average daily turnover ~HK$350 million; large orders should be executed in tranches), with position size capped by the "validation not yet materialized" constraint.
Risks and counter-evidence: Downside — advertising growth falling below 15% (macro budget contraction), The Royal Way slipping to 2027, deepening decay of Hero's Journey, escalating minor-protection regulation, RMB depreciation amplifying USD-debt FX losses; the VIE structure (FY2025 VIE revenue at 64.8%) is an undiversifiable tail risk. Upside — Q3 advertising beating guidance, Q4 gaming inflection realized, Rumi's global ramp, buyback cancellation execution.
Monitoring plan (key points): 2026-11-04 Tencent buyback settlement and cancellation pace; Q3 earnings in mid-to-late November 2026 (advertising YoY thresholds 21%/20%, gaming decline narrowing to single digits, adjusted net margin ≥9%); The Royal Way scheduling announcement and first-month iOS grossing rank; buyback execution and share cancellation in the monthly return of securities movements; two price discipline lines — HK$160 (upper bound of target range, margin of safety exhausted) and HK$80 (bear-case floor, reassessment trigger). Next quarter's results will be reconciled against this report's FY2026 forecasts (revenue RMB 32.2–33.2 billion, adjusted net profit RMB 2.9–3.2 billion).
Data and citation sources: Bilibili HKEX announcements (2026 interim results announcement, FY2025 annual results announcement and annual report, convertible notes pricing and EGM announcements, monthly return of securities movements), BILI 2026Q2 earnings call transcript, Game Publishing Committee of the China Audio-Video and Digital Publishing Association / Gamma Data, QuestMobile, Zhitong Caijing, MarketBeat, etc.; valuation and forecasts are this report's own estimates, at an exchange rate of RMB 1 = HK$1.1779 (2026-10-30). This report does not constitute investment advice.