We expect YY to deliver 2Q20E results in mid-Aug, with revenue/ adj. net profit decline of 18%/ 23% YoY, 0%/-9% compared to consensus. Bigo rev would still see 70% YoY growth despite banning of Chinese apps in India. Market concern lies in potential ban in US, contributing ~10% of Bigo’s rev. We expect YY Core’s rev to be flat YoY in 2Q20E. We keep positive on Bigo’s TAM in overseas market, and expect its secular growth potential to remain intact despite short term geographic headwinds. We lifted our TP to US$99 by rolling over to FY21E multiple, with forecast unchanged.
- 2Q20E preview. We expect JOYY’s revenue/non-GAAP net profit to decline 18%/ 23% YoY in 2Q20E, 0%/-9% compared to consensus. By segment, we estimate YY Core/ Bigo rev to grow at 70%/0% YoY, with total non-GAAP OPM at 6.5%. We expect limited financial impact from India ban, and reiterate our confidence on Bigo’s growth potential.
- Limited impact from geographic risks. JOYY’s share price bears pressure recently due to banning of Chinese apps in India and potential risk in US. However, India market targeted short-video user expansion, rather than monetization or profitability. It contributes <5% of Bigo’s rev and posed limited financial impact on JOYY group. After India, US & Japan are considering ban on Tiktok, suggesting potential risk for other Chinese apps. US market currently devotes ~10% of Bigo’s rev, and still operates normally at this moment. Given overseas livestreaming TAM of over US$10bn, we believe Bigo is still at early development, and its monthly breakeven target in 4Q20E stays intact. We forecast Bigo’s topline/ bottom line at RMB2.1bn/-RMB220mn in 2Q20E, with rising contribution from developed markets.
- YY Core on track. We expect YY Core’s revenue to be flat YoY in 2Q20E (vs. -4% YoY in 1Q20), and see positive growth in 2H20E. We forecast YY Core’s non-GAAP OPM at 20% in 2Q20E for effective cost control. Given macro uncertainty under epidemic, we expect its disciplined investment and expenses to continue.
- Maintain BUY. We lifted our TP to US$99 from US$81 by rolling over to FY21E multiple and in consideration of Huya’s mkt cap change (20.0x FY21E P/E). We think market concern on geographic headwinds has been partly priced in recent weak price. Valuation is not demanding, given Bigo solid momentum and further catalysts (e.g. Huya’s disposal).
