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  • Writer's pictureIshfaaq Peerally

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


DouYu Stock Analysis


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