Huya Earnings: Share Buyback Should Narrow the Net Cash Discount; Shares Undervalued

Huya’s third-quarter 2023 earnings exceed ours and Refinitiv's consensus expectations, but management’s 2024 guidance is largely unchanged. After fine-tuning our near-term forecasts, we maintain our $7.70 fair value estimate. We view the firm as significantly undervalued. The bulk of our valuation stems from Huya's net cash position of $5.90 per share as of the end of the quarter. The closing price of $3.69 on Nov. 15 reflects a substantial discount compared with the company’s net cash position. Nonetheless, as Huya continues to execute its share buyback program announced in August 2023, we anticipate the net cash discount to narrow gradually.