DouYu 3Q21 Earnings Analysis


DouYu Stock Analysis

Catalysts:


  • China has the largest eSport market in the world with $37.9 billion in revenues in 2018 (vs $30.4 billion for the US) and is growing at 25% annually.


Risks:

  • Antitrust probes on Chinese Big Tech

  • Volatility of Chinese emerging tech stocks

  • Chinese government has unfavorable opinion on gaming

  • Delisting of Chinese stocks on US exchanges


Financial Analysis:


DouYu Stock Analysis

Valuations

  • My personal Biases

  • 1.4% of my portfolio - worst-performing investment

  • First invested as an arbitrage opportunity


  • Assumptions

  • Revenue growth of 15% annually for the next 5 years (17% annually from 2019 to 2021)

  • FCF margin of 8% on average (currently 12%)

  • Terminal Growth rate of 5%

  • Discount Rate of 15%

DouYu Stock Analysis

  • Exit Multiples Analysis

  • Based on Multiples of P/FCF in 2025

  • 23% higher in bull case and 10% lower in bear case

  • 10% shares repurchased in these 5 years

DouYu Stock Analysis

Conclusion

  • Stock undervalued with a 20% margin of safety, it would be fairly valued

  • Still a BUY but because of my exposure, I’m not going to buy more for the time being

Full Research and Analysis: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/27998689


DouYu Stock Analysis


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