Source: Beast Finance Author: Beast Finance
Analysts expect Huya's Q4 2022 results to remain poor
Huya (HUYA) will disclose the company's Q4 2022 financial results on March 21, 2023 before trading hours. At present, the seller is not optimistic about Huya's financial performance in the fourth quarter of 2022, because the general financial data shows that the market expects the company's revenue to decline and lose money.
Specifically, the market believes that Huya's revenue will drop from RMB 2.809 billion in the fourth quarter of 2021 to RMB 2.135 billion in the fourth quarter of 2022. In other words, in RMB terms, Huya's YoY revenue is expected to deteriorate from -20.1% in Q3 2022 to -24.0% in Q4 2022.
Analysts also predict that Huya's normalized net profit will also decline from 106 million yuan in the third quarter of 2022 to a non-GAAP adjusted net loss of 502 million yuan in the fourth quarter of 2022. In contrast, Huya's net loss in the fourth quarter of 2021 was -242 million yuan.
Forecasting Huya's fourth-quarter financial performance
Boldbeast Finance believes that Huya's actual financial performance in the fourth quarter of 2022 should be in line with current market expectations.
At the end of 2022, China began to abandon the long-held policy of eradicating the epidemic, which led to a large increase in pandemic cases. A Bloomberg article on December 23, 2022 highlighted that nearly 18% of Chinese people were infected with COVID-19 in the first three weeks or so of December last year. It is reasonable to assume that a large number of streamers in China will also be infected with the COVID-19 virus during the same period.
In addition, at the 2022 third-quarter financial report conference held in mid-November last year, Huya admitted that the "S-12" or "League of Legends" World Championship Season 12 in 2022 (held in November) has a significant impact on its "monthly active users". "The positive impact may not be as obvious as it was in previous years.
Therefore, it is very likely that Huya's revenue in the fourth quarter of 2022 will drop significantly and it will suffer losses. However, the current sell-side analysts' forecasts for Huya's financial performance in the fourth quarter of 2022 should have also factored in the headwinds Huya faced in the last quarter of last year. In the past three months, after Huya announced its third-quarter 2022 results, 11 of the 16 Wall Street analysts covering Huya's stock have lowered their revenue forecasts for the fourth quarter of fiscal 2022.
Licensing Agreement Changes Have a Significant Impact on Huya in 2023 On
January 12, 2023, Huya released a 6-K filing disclosing that it "has changed its licensing agreement with Tencent (00700) affiliates for the broadcasting of League of Legends matches" . The development also has complex implications for Huya's outlook for 2023.
Beast Finance believes that Huya's revenue in 2023 will be affected by "League of Legends" having no licensing revenue in the next three years between 2023 and 2025. That's because Huya will only have the non-exclusive rights to broadcast Seasons 13-15 of the League of Legends World Championship (as opposed to the exclusive rights it has had in the past). According to our calculations, Huya should be able to earn hundreds of millions of RMB in revenue from the broadcast licensing income of "League of Legends" every year before then.
On the other hand, Huya's content-related expenses related to League of Legends are also expected to decrease. Specifically, Huya’s annual licensing fee for League of Legends will drop from about 400 million yuan in the past to 150 million yuan in the next three years.
The financial impact of changes in the "League of Legends" licensing agreement on Huya is also reflected in the seller's general financial forecast for Huya in 2023. According to S&P Capital IQ, the market expects that Huya's revenue is expected to decline by 7.1% to 8.572 billion yuan in FY2023, while its normalized net loss is expected to narrow from -334 million yuan in FY2022 to FY2023. Year's - 71 million yuan.