Investment Rating - The investment rating for the company is "Buy" (maintained) [2][5] Core Views - The company is expected to accelerate growth with the launch of multiple new games, with over 10 new titles announced, including "Firefly Assault" and "Yanyun Sixteen Sounds," which have already received approval for release [5] - The company maintains its profit forecasts for 2024-2026, projecting net profits of 33.9 billion, 37.3 billion, and 40.4 billion CNY respectively, with corresponding EPS of 10.5, 11.6, and 12.6 CNY [5] - The company has a diverse product matrix that continues to yield successful products, driving long-term growth [6] - The company is expanding its global product cycle, which may further open up growth opportunities in overseas markets [7] Financial Summary - The company's total revenue for 2022 was 96.5 billion CNY, with a projected increase to 118.1 billion CNY in 2024, reflecting a year-on-year growth of 14.2% [8] - The net profit for 2022 was 20.3 billion CNY, expected to rise to 33.9 billion CNY in 2024, indicating a year-on-year growth of 15.1% [8] - The gross margin is projected to improve from 54.7% in 2022 to 61.7% in 2024, while the net margin is expected to remain stable around 28% [8]

Core Insights - NetEase, Inc. announced a diverse product lineup and plans for over 40 game franchises at its annual product launch event on May 20, 2024 [1][2] - The event showcased new game titles and updates, including Where Winds Meet, NARAKA: BLADEPOINT Mobile, Once Human, Ashfall, and Lost Light, aimed at domestic audiences [1] - The company also revealed plans for expanding existing popular titles through new content, crossovers, and events [1] Group 1 - The annual product launch event, first introduced in 2015, serves as a celebration for developers, players, and partners, highlighting NetEase's commitment to providing exhilarating gaming experiences [2] - NetEase operates a vast gaming ecosystem, developing and managing some of the most popular mobile and PC games in China and globally [3] - The company is supported by one of the largest in-house game R&D teams, focusing on creating superior gaming experiences and delivering value to its community [3] Group 2 - Beyond gaming, NetEase has majority-controlled subsidiaries such as Youdao, an intelligent learning company, and Cloud Music, an online music platform, enhancing its service offerings [4]

Core Viewpoint - Cloud Music Inc. has entered into a licensing agreement with Kakao Entertainment Corp. to distribute Kakao's music catalog in China, aiming to enhance the presence of K-Pop and Korean artists among Chinese music enthusiasts [1][7]. Group 1: Agreement Details - The agreement allows for diverse strategies to promote Kakao Entertainment's catalog and artists, targeting younger audiences in China [2][5]. - Both companies will collaborate to promote Korean music and enhance the quality of content available on NetEase Cloud Music [2][6]. Group 2: Kakao Entertainment Overview - Kakao Entertainment, established in 2010, has a diversified portfolio that includes webtoons, films, talent management, and K-Pop, with significant influence in the global music market [2][3]. - The company holds distribution rights for 70,000 tracks and features over 50 prominent K-Pop artists, contributing to its global popularity [3]. Group 3: NetEase Cloud Music Overview - NetEase Cloud Music is a leading online music platform in China, boasting 206 million monthly active users and over 44 million paying subscribers as of 2023 [4]. - The platform is known for its community atmosphere and advanced personalized recommendations, which enhance user engagement and artist-audience interaction [4][5]. Group 4: Strategic Implications - The partnership is expected to leverage NetEase Cloud Music's popularity among younger users to facilitate the distribution of Kakao's content, enhancing the connection between Korean artists and their Chinese fan base [5][6]. - NetEase Cloud Music has been expanding its music catalog, reaching approximately 149 million cumulative tracks by the end of 2023, and has established agreements with several top record labels [8].

Core Viewpoint - Cloud Music Inc. has entered into a licensing agreement with JYP Entertainment to distribute its music catalog in China, enhancing the availability of K-Pop music on its platform [1][2]. Group 1: Agreement Details - The agreement allows both companies to promote K-Pop artists and enhance the user experience for Chinese music lovers [2]. - NetEase Cloud Music will feature a wide range of JYP Entertainment's artists, including TWICE, Stray Kids, and ITZY, along with their latest albums and hit songs [3]. Group 2: User Engagement and Platform Strength - In 2023, NetEase Cloud Music had 206 million monthly active users and over 44 million monthly paying users, indicating strong engagement, particularly among younger audiences [5]. - The platform's recommendation system has improved, leading to a growing proportion of music streams from personalized recommendations, which benefits JYP Entertainment's content distribution [5]. Group 3: Industry Position and Collaborations - NetEase Cloud Music has previously collaborated with other major South Korean entertainment companies, such as SM Entertainment and YG Entertainment, to expand its K-Pop library [6]. - By the end of 2023, the platform had approximately 149 million cumulative music tracks, showcasing its extensive copyright content and collaborations with global music labels [7]. Group 4: Company Background - Founded in 2013, Cloud Music Inc. is recognized for its vibrant content community and personalized user experience, making it a popular platform among China's Generation Z [8].

Financial Performance - Net revenue increased to RMB 103,468,159 thousand in 2023 from RMB 96,495,809 thousand in 2022, representing a growth of 7.2%[5] - Gross profit rose to RMB 63,063,394 thousand in 2023 from RMB 52,766,126 thousand in 2022, marking a 19.5% increase[5] - Net profit attributable to the company's shareholders grew to RMB 29,416,552 thousand in 2023 from RMB 20,337,600 thousand in 2022, a 44.6% increase[5] - Net revenue for 2023 reached RMB 103,468,159 thousand (USD 14,573,185 thousand), a 7.2% increase from 2022[22] - Gross profit for 2023 was RMB 63,063,394 thousand (USD 8,882,293 thousand), up 19.5% from 2022[22] - Operating profit for 2023 increased to RMB 27,709,144 thousand (USD 3,902,751 thousand), a 41.2% rise from 2022[22] - Net profit attributable to the company's shareholders for 2023 was RMB 29,416,552 thousand (USD 4,143,234 thousand), a 44.7% increase from 2022[22] - Net profit increased to RMB 29,357,223 thousand in 2023, up from RMB 19,843,290 thousand in 2022, representing a growth of 47.96%[23] - Total comprehensive income reached RMB 29,579,095 thousand in 2023, compared to RMB 21,284,704 thousand in 2022, a 38.97% increase[23] - Net profit increased from RMB 16,976,190 thousand in 2021 to RMB 29,357,223 thousand in 2023, representing a growth of 72.9%[25] - NetEase's total net revenue for 2023 reached RMB 90.789 billion, up from RMB 83.367 billion in 2022[33] - NetEase's net profit for 2023 was RMB 328.357 million, a significant improvement from a net loss of RMB 81.329 million in 2022[33] - Net profit attributable to the company's shareholders increased to RMB 29,077,216 in 2023, up from RMB 20,724,629 in 2022[172] Assets and Liabilities - Total assets increased to RMB 185,924,978 thousand in 2023 from RMB 172,760,985 thousand in 2022, a 7.6% rise[5] - Total liabilities decreased to RMB 57,840,897 thousand in 2023 from RMB 63,887,505 thousand in 2022, a 9.5% reduction[5] - Shareholders' equity increased to RMB 127,968,322 thousand in 2023 from RMB 108,737,040 thousand in 2022, a 17.7% growth[5] - Total assets as of December 31, 2023, were RMB 185,924,978 thousand (USD 26,186,985 thousand), up 7.6% from 2022[19] - Total liabilities as of December 31, 2023, were RMB 57,840,897 thousand (USD 8,146,720 thousand), a 9.5% decrease from 2022[20] - Total equity attributable to the company's shareholders as of December 31, 2023, was RMB 124,285,776 thousand (USD 17,505,285 thousand), up 18.7% from 2022[21] - Total assets grew to RMB 188,620,527 in 2023, compared to RMB 175,901,186 in 2022[173] - Total liabilities rose to RMB 57,908,744 in 2023, up from RMB 64,083,689 in 2022[173] - Total equity attributable to shareholders reached RMB 130,711,783 in 2023, up from RMB 111,817,497 in 2022[173] Investments - Equity method investments totaled RMB 6,109.2 million as of December 31, 2023[12] - Long-term equity investments without readily determinable fair values amounted to RMB 12,021.5 million as of December 31, 2023[12] - Management conducts regular impairment tests on equity method investments and long-term equity investments[12] - The company evaluates the fair value of long-term equity investments qualitatively to identify potential impairment indicators[12] - Long-term investments increased from RMB 18,544,358 thousand in 2022 to RMB 21,783,187 thousand in 2023, with significant growth in equity method investments and investments with readily determinable fair values[107] - Equity method investments generated profits of RMB 473.9 million in 2023, down from RMB 1.3 billion in 2022 and RMB 1.6 billion in 2021[108] - Investments with readily determinable fair values recorded a fair value gain of RMB 535.3 million in 2023, compared to a loss of RMB 3.4 billion in 2022 and a gain of RMB 91.1 million in 2021[109] - Impairment losses on investments without readily determinable fair values increased to RMB 274.2 million in 2023, up from RMB 85.2 million in 2022 and RMB 19.2 million in 2021[110] Revenue Streams - The company recognized RMB 81.6 billion in game and related value-added service revenue for the year ended December 31, 2023[11] - The company generates revenue through online gaming, tutoring services, smart hardware sales, online music, live streaming, advertising, e-commerce, and other paid value-added services[36] - The company's revenue is primarily derived from online game services, tutoring services, smart hardware sales, online music services, live streaming services, advertising services, e-commerce, and other paid value-added services[44] - Net revenue for games and related value-added services increased from RMB 67.8 billion in 2021 to RMB 81.6 billion in 2023, representing a growth of 20.3%[158] - Net revenue for Youdao decreased from RMB 5.4 billion in 2021 to RMB 5.0 billion in 2022 but rebounded to RMB 5.4 billion in 2023[158] - Net revenue for Cloud Music peaked at RMB 8.99 billion in 2022 but declined to RMB 7.87 billion in 2023[158] - Total net revenue grew from RMB 87.6 billion in 2021 to RMB 103.5 billion in 2023, an increase of 18.1%[158] - Gross profit for games and related value-added services rose from RMB 41.8 billion in 2021 to RMB 55.6 billion in 2023, a 33.1% increase[158] - Total gross profit increased from RMB 47.0 billion in 2021 to RMB 63.1 billion in 2023, up 34.3%[158] Audit and Financial Reporting - The company's financial statements were prepared in accordance with U.S. GAAP and were audited by PricewaterhouseCoopers[7] - The company’s directors are responsible for preparing the consolidated financial statements in accordance with US GAAP[15] - The audit committee oversees the company’s financial reporting process[15] - The auditor’s responsibility is to obtain reasonable assurance that the consolidated financial statements are free from material misstatement[16] - The auditor evaluated the appropriateness of the accounting policies and the reasonableness of the accounting estimates made by the directors[17] - The audit partner for the independent auditor’s report is Tang Haobang[18] - The audit identified no material misstatements in the other information provided by the company[14] - The company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses[43] - The company's revenue recognition involves judgments on the estimated lifespan of virtual items purchased by game players, unredeemed game points, and sales returns[44] VIE Structure and Risks - The company has contractual arrangements with VIE entities for additional financial support or guarantees if needed[35] - The company believes that its contractual arrangements with VIE entities comply with Chinese law and are legally enforceable, but uncertainties in the Chinese legal system may limit its ability to enforce these arrangements[40] - The company consolidates VIE entities if it has the power to significantly influence their activities and the obligation or right to bear or obtain significant losses or benefits from them[42] - The company faces risks related to VIE entity arrangements, including potential government actions that could revoke business licenses, restrict operations, or require restructuring[41] - The company's VIE entity arrangements include irrevocable voting rights and exclusive purchase options, which are critical to its financial performance and cash flows[39] - The company acknowledges that changes in Chinese laws or regulations could lead to significant disruptions in its business operations and financial reporting[40] - The company's management considers the likelihood of losses related to its VIE entity arrangements to be minimal[39] - The company's VIE entity arrangements are designed to ensure control over economic activities and benefits, but legal uncertainties could impact their enforceability[40] - VIE entities accounted for 85.9%, 86.4%, and 87.7% of the company's total net revenue in 2021, 2022, and 2023 respectively[188] - VIE entities' total assets (excluding receivables from other NetEase Group companies) represented 7.1% of the company's consolidated total assets as of December 31, 2022 and 2023[188] - The company's operations are primarily conducted through subsidiaries in mainland China and contractual arrangements with VIE entities[188] - The company's structure poses unique risks to investors due to its Cayman Islands holding company status and VIE arrangements[183] - VIE structure contracts may not be as effective as direct ownership and could incur significant costs to enforce[189] - Uncertainty exists regarding the interpretation and application of current and future Chinese laws, regulations, and rules related to VIE structures[189] - If VIE entities or nominal shareholders fail to fulfill obligations, the company's ability to enforce contracts and consolidate financials may be limited[189] - The Foreign Investment Law in China does not explicitly list contractual arrangements as a form of foreign investment, creating potential future risks[190] - A significant portion of the company's revenue is generated by VIE entities, which hold necessary licenses for operations in China[190] - Chinese government actions could impact the enforceability of VIE contracts, potentially affecting financial performance[190] - The Chinese government has significant power to influence the company's operations, foreign investment, and ability to list on U.S. exchanges[191] - Recent regulatory actions by the Chinese government, including those related to overseas securities issuance, could adversely affect the company[191] - The company faces risks related to antitrust investigations, cybersecurity, and data privacy compliance in China[191] Cash Flow and Financing - Operating cash flow rose from RMB 24,926,727 thousand in 2021 to RMB 35,331,275 thousand in 2023, an increase of 41.7%[25] - Investment cash outflow increased from RMB 7,078,294 thousand in 2021 to RMB 17,043,431 thousand in 2023, a significant rise of 140.8%[26] - Financing cash outflow grew from RMB 12,585,569 thousand in 2021 to RMB 21,467,054 thousand in 2023, up by 70.6%[26] - Cash and cash equivalents decreased by RMB 3,381,667 thousand in 2023, compared to an increase of RMB 10,212,210 thousand in 2022[27] - Net cash inflow from third-party transactions increased from RMB 61,272,031 in 2021 to RMB 72,325,460 in 2023[34] - Net cash outflow from technology consulting and services with group companies rose from RMB 59,439,552 in 2021 to RMB 73,298,667 in 2023[34] - Net cash outflow from investment activities increased from RMB 39,430 in 2021 to RMB 82,645 in 2023[34] - Net cash outflow from financing activities decreased from RMB 1,301,096 in 2021 to RMB 37,166 in 2023[34] - The company canceled a $500 million unsecured syndicated loan facility in early 2024[132] - The company declared cash dividends of RMB 6.3 billion and RMB 11.7 billion ($1.7 billion) for the fiscal years 2022 and 2023, respectively[153] - The company completed a $3 billion share repurchase plan, repurchasing approximately 33.6 million ADS by January 9, 2023[154] - A new share repurchase plan of up to $5 billion was approved, with 7.2 million ADS repurchased for approximately $644.1 million by December 31, 2023[154] - The company repurchased approximately 2.7 million ADS of Youdao for about $22.0 million under a separate repurchase plan by December 31, 2023[154] Taxation - Hong Kong subsidiaries are subject to a profits tax rate of 16.5%, with a reduced rate of 8.25% for the first HKD 2 million of profits starting from the 2021 tax year[114] - The company's subsidiaries, including Bo Guan and NetEase Hangzhou, qualified as high-tech enterprises and enjoyed a preferential tax rate of 15% for 2021, 2022, and 2023[115] - The total impact of corporate income tax exemptions and rate reductions was RMB 3,228,359 thousand in 2023, up from RMB 2,631,764 thousand in 2022 and RMB 2,238,907 thousand in 2021[117] - The company's actual effective tax rate decreased to 13.8% in 2023, down from 20.7% in 2022 and 19.6% in 2021, primarily due to the impact of lower tax rates for high-tech enterprises[120] - The company's deferred tax assets related to net operating tax losses amounted to RMB 3,424,344 thousand as of December 31, 2023, down from RMB 3,781,233 thousand in 2022[123] - The company's deferred tax liabilities for withholding tax increased to RMB 2,165,573 thousand in 2023, up from RMB 1,947,190 thousand in 2022[123] - The company's total income tax expense was RMB 4,699,704 thousand in 2023, down from RMB 5,031,838 thousand in 2022 and RMB 4,128,269 thousand in 2021[118] - The company's payable corporate income tax decreased to RMB 1,790,393 thousand in 2023, down from RMB 2,116,014 thousand in 2022[128] - The company's deferred tax asset impairment provision decreased to RMB 3,718,678 thousand in 2023, down from RMB 3,971,516 thousand in 2022[125] - The company's withholding tax liabilities were RMB 1.5 billion in 2023, down from RMB 2.1 billion in 2022 and RMB 1.1 billion in 2021[126] Operational Risks - The company faces risks related to the development and popularity of new online games and the enhancement of existing ones[195] - Risks associated with the Chinese government implementing more restrictions on online gaming[196] - Risks related to the internationalization of the company's online gaming operations[196] - Risks concerning the maintenance of existing game copyrights or intellectual property[196] - Risks related to the company's overall operational expansion and internationalization[197] - Risk of delisting from NASDAQ if PCAOB fails to inspect the company's independent registered public accounting firm for two consecutive years under the Holding Foreign Companies Accountable Act[200] - Risk of volatility in the trading price of the company's American Depositary Shares (ADS) and shares[200] - Risk associated with different listing rules and regulations applicable to the company[200] - Risk related to the voting, inspection, and other rights of ADS holders[200]

Annual Report and ESG Report - NetEase filed its annual report on Form 20-F for the fiscal year ended December 31, 2023, which includes audited consolidated financial statements and is available on the Company's investor relations website [1] - The Company will provide a hard copy of the annual report free of charge to shareholders and ADS holders upon request [1] - NetEase published its 2023 Environmental, Social, and Governance (ESG) Report, detailing progress and performance in key ESG areas, accessible on the Company's investor relations website [2] Company Overview - NetEase is a leading internet and game services provider, focusing on premium content and operating popular mobile and PC games in China and globally [3] - The Company has one of the largest in-house game R&D teams, creating superior gaming experiences and delivering value to its global community [3] - NetEase integrates culture and technology into gaming, aiming to build a more entertaining and enlightened world [3] Subsidiaries and Services - NetEase's majority-controlled subsidiaries include Youdao, an intelligent learning company with industry-leading technology, and Cloud Music, a well-known online music platform [4] - The Company also operates Yanxuan, a private label consumer lifestyle brand [4]

FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |-------|--------------------------------------------------------| | | NETEASE, INC. | | | (Exact name of Registrant as specified in its charter) | | | N/A | | | (Translation of Registrant's name into English) | | | Cayman Islands | Table of Contents Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered ...

交银国际研究 公司更新 网易 (NTES US) 暴雪恢复合作对短期业绩影响有限，提升海外长期合作空间 近期流水更新：我们根据第三方追踪的网易流水数据显示，《射雕》（3 月 28 日上线）表现不及预期，估算手游首月流水 1-2 亿元，低于我们此前 预期的 5-8 亿元，《逆水寒》3 月流水降至 7 亿元，考虑新游上线或集中 在 2 季度末，我们预计网易 1 季度/2 季度手游收入同比增速约为 10%，略 低于此前预期，后续《永劫无间手游》、《燕云十六声》等新游确立上线 时间将为游戏增长带来更多确定性。预计全年游戏收入增 12%，其中端游 /手游分别增 15%/10%。 估值：我们基于近期流水波动，下调 2024 年收入/利润预期 2%/4%，基于 18 倍 2024 年游戏市盈率不变，目标价从 135 美元/206 港元下调至 127 美 元/194 港元（9999 HK），期待今年重磅手游《永劫无间手游》、《燕云 十六声》上线提振游戏收入增长，维持买入。 收盘价 目标价 潜在涨幅 美元 100.62 美元 127.00↓ +26.2% 互联网 2024 年 4 月 10 日 4 月 10 日暴雪中国与网易共 ...

11 Apr 2024 Renewed agreement with Blizzard; expect games revenue growth to reaccelerate in 2H24E NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China. Popular titles such as World of Warcraft, Hearthstone, and Diablo will return to the Chinese market sequentially starting in summer 2024. NetEase also reached an agreement with Microsoft to bring NetEase titles to Xbox and other platforms. We expect the return of Blizzard game ...

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 205.4 HKD, compared to the current price of 158.8 HKD [3]. Core Insights - The return of Blizzard's games to the Chinese market is expected to have a limited positive impact on the overall growth of the company, despite the potential to attract returning players [2]. - The company's online gaming revenue is projected to recover slightly due to the return of Blizzard titles, but reliance on these titles is expected to decrease as new mobile games are launched [2]. - The partnership with Microsoft is anticipated to enhance the company's overseas market presence, which currently accounts for only about 10% of its gaming revenue [2]. Financial Performance and Forecast - The company’s revenue for 2023 is estimated at 103,468.2 million RMB, with a growth rate of 7.2% [8]. - Non-GAAP net profit for 2023 is projected to be 32,608.3 million RMB, reflecting a significant growth of 43.0% compared to the previous year [8]. - The forecast for adjusted net profit for 2024, 2025, and 2026 is 34,018.0 million RMB, 38,248.3 million RMB, and 41,474.9 million RMB respectively [8]. Revenue Breakdown - The company’s gaming revenue is expected to be increasingly driven by mobile games, which accounted for 76.7% of total gaming revenue by Q4 2023 [2]. - The anticipated revenue from the return of Blizzard games is expected to be a small positive contributor to the overall revenue growth [2]. Market Position and Strategy - The report highlights the potential for the company to leverage its expertise in mobile game development alongside popular overseas IPs, which could lead to increased revenue streams [2]. - The company is also focusing on expanding its overseas market presence, which is currently lower than competitors like Tencent [2].