Maintain an overweight rating of the NASDAQ:YY stock

The following is the full report:

-revenue growth in third quarter is expected to be strong

We estimate that the third quarter of the gathering period revenue of 442 million yuan, an increase of 93%. This growth is mainly from the web game business and yy music business. We expect that the revenue from the time of the gathering will increase 92% to 161 million yuan, and yy music revenue will grow 103% to 177 million yuan a year.

-Operating margins are likely to remain stable

We estimate that the third quarter of the gathering period will be recorded in 25 million to 30 million yuan and "Happy boys" cooperative operation related to the content costs. Therefore, we expect that the third quarter of the gathering period of revenue and content costs will increase by 20%, year-on-year growth of 238% to 106 million yuan. We estimate, however, that non-US GAAP operating margins will remain flat on a month-on-month basis, with a third quarter of 28.5%, slightly above 28.1% in the second quarter. This is mainly due to: 1 high margin business, including the strong growth of YY music and web game, and 2 cost reduction initiatives. We expect the gross margin of the quarter to rise to 57% per cent due to falling content costs.

-Key factors to be concerned

1. Average revenue per user (ARPU) trends in web games and yy music business

2. Conversion rates for paid users

3. Game Release Channel

4. Development of online education business

Development of 5.YY Mobile Edition and its commercialization progress