HUYA Inc.

HUYA Details

HUYA Inc. (NYSE: HUYA) is a company based in China that runs a live streaming platform with a large and active community of game streamers. Its most popular content genre is E-sports live streaming, developed in collaboration with e-sports event organizers, game developers, and publishers. Other non-game entertainment options on its platform include talent shows, anime, and outdoor activities. As of October 15, 2021, the company had 237.10 million American Depository Shares (ADS) listed and outstanding, with each ADS representing one Class A ordinary share.

Update on Key Personnel: On September 03, 2021, HUYA announced that Catherine Xiaozheng Liu resigned from her position of Chief Financial Officer (CFO) effective September 08, 2021. In her place, Ashley Xin Wu was promoted to Vice President of Finance. Ms Wu has been part of the company since September 2017 and has previously served as the company's finance leader.

Q2FY21 Results: The company reported a slight 9.83% increase in total net revenues to RMB 2.96 billion in Q2FY21 (ended June 30, 2021) compared to USD 2.70 billion in Q2FY20, primarily due to an increase in overseas live streaming and content licensing. Net income for Q2FY21 reduced to RMB 186.25 million from RMB 206.76 million in Q2FY20. The company exited the quarter with a cash balance (including short-term deposits and investments) of RMB 10.74 billion and no outstanding debt.

Key Risks: Tencent Holdings Limited owns 69.7% of HUYA's common stock as of March 31, 2021, giving it significant control over the company's activities while limiting other shareholders' power to influence business decisions. Moreover, 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.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

HUYA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: HUYA's stock price decreased 50.77% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 7.52 to USD 36.33. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 47.16. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 10.74. Considering the significant correction in the stock price, decent balance sheet, China's crackdown, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 8.95, down 1.49% as of October 15, 2021, 1:20 PM ET.

* 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.