HUYA Inc.

HUYA Details

HUYA Inc. (NYSE: HUYA) is a China-based operator of the live streaming platform with an extensive and active community of live game streamers. E-sports live streaming is HUYA's most popular video type, which was created in partnership with e-sports event organizers, game developers, and publishers. Talent shows, anime, and outdoor activities are among the non-game entertainment choices available on its platform. As of December 07, 2021, the HUYA's market capitalization stood at USD 1.68 billion, with 237.33 million American Depository Shares (ADS) listed and outstanding (each ADS representing one Class A ordinary share).

Q3FY21 Results:

• Slight Increase in Topline: The company reported a meagre 5.71% increase in total revenue to RMB 2.98 billion in Q3FY21 (ended September 30, 2021) compared to RMB 2.81 billion in Q3FY20, driven by YoY growth of 137.01% in Advertising and other revenue.
• Surge in Net Income: Net income for Q3FY21 increased 107.25% YoY and stood at RMB 524.38 million compared to RMB 253.01 million in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had a cash balance (including short-term deposits and investments) of RMB 11.12 billion and no outstanding debt.

Key Risks:

• Regulatory and Political Risk: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.
• Voting Concentration Risk: As of March 31, 2021, Tencent Holdings Limited owned 69.7% of HUYA's common stock, thus gaining substantial control over its operations. This constrains the ability of other shareholders to influence corporate decisions.

HUYA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

HUYA's share price has declined 70.32% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 6.08 to USD 36.33. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 44.53.

Considering the correction in the stock price in the past nine months, strong bottomline performance, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 7.71, up 9.05% as of December 07, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.   

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