Investment Rating - The report maintains a "Buy" rating for the company and raises the target price to HKD 185 / USD 119 [4][6][7]. Core Insights - The company's Q4 2024 revenue was RMB 26.75 billion, a slight year-on-year decline of 1.4%, primarily due to a decrease in non-gaming business [1]. - Game-related revenue increased by 1.5% year-on-year, with a notable 56.6% growth in PC game revenue, driven by titles such as "Naraka: Bladepoint" and "Dungeons & Dragons" [2][3]. - The launch of new games is expected to drive revenue growth, with strong performance from titles like "Marvel's Avengers" and "World of Warcraft" [3]. Summary by Sections Financial Performance - Q4 2024 adjusted net profit was RMB 9.68 billion, exceeding market expectations of RMB 8.12 billion, with an adjusted net profit margin of 28.6% [1]. - The company forecasts FY25E revenue of RMB 113.5 billion and FY26E revenue of RMB 121.5 billion, with adjusted net profits of RMB 34.5 billion and RMB 37 billion respectively [4][5]. Game Revenue Breakdown - Q4 2024 game revenue reached RMB 20.5 billion, a year-on-year increase of 5.1%, with mobile game revenue declining by 10.5% due to high base effects from the previous year [2]. - The share of PC games in total game revenue increased to 34.7%, reflecting the company's strong long-term operational capabilities [2]. New Game Pipeline - The company has a robust pipeline of new games, including "Destiny: Rising" and "Marvel's Secret Wars," which are expected to launch in 2025 [3]. - The successful launch of "Marvel's Avengers" has already seen over 40 million registered users, indicating strong market interest [3]. Shareholder Returns - The company is committed to shareholder returns, with a total of USD 2.88 billion allocated for dividends and buybacks in 2024, representing a return rate of approximately 4.3% [4].

Group 1 - NetEase reported 4Q24 results with net revenue below consensus due to steady progress in the gaming business being offset by weakness in non-game segments [1] - Mobile games showed softness during the quarter, while PC gaming performance was not detailed [1] Group 2 - Astrada Advisors provides actionable recommendations to enhance portfolio performance and uncover alpha opportunities, leveraging a strong track record in investment research [1] - The firm specializes in technology, media, internet, and consumer sectors across North America and Asia, identifying high-potential investments and navigating complex industries [1] - Astrada Advisors integrates rigorous fundamental analysis with data-driven insights to offer a nuanced understanding of key trends, growth drivers, and competitive landscapes [1]

Investment Rating - The investment rating for the company is "Outperform the Market" [3][4][18] Core Views - The company reported a revenue of 26.7 billion yuan in Q4 2024, a year-on-year decrease of 1%, but achieved a Non-GAAP net profit of 9.7 billion yuan, representing a 31% increase year-on-year [1][6] - The online gaming business showed strong performance with a revenue of 20.5 billion yuan in Q4 2024, a 5% increase year-on-year, driven by significant growth in PC games [10][11] - The company has a robust game pipeline, with expectations for new flagship games like "Yanyun Sixteen Sounds" and the return of "Overwatch" [2][11] Summary by Sections Financial Performance - In Q4 2024, the company achieved a Non-GAAP net profit margin of 36%, up 9 percentage points year-on-year, aided by a foreign exchange gain of 1.54 billion yuan [1][6] - The sales expense ratio decreased to 11%, down 5 percentage points year-on-year, reflecting improved marketing efficiency [1][7] Gaming Segment - The mobile gaming revenue was 13.4 billion yuan, down 11% year-on-year, primarily due to a high base from the previous year, while PC gaming revenue surged to 7.1 billion yuan, up 57% [10][11] - The deferred revenue for the company reached 15.2 billion yuan, a 14% increase year-on-year, indicating strong future revenue potential [10] New Game Releases - "Marvel Showdown" performed exceptionally well, reaching the top of the Steam sales chart within 4 hours of release and accumulating over 40 million players [2][11] - The company anticipates that "Yanyun Sixteen Sounds" will become another flagship game, with a growing audience over time [2][11] Other Business Segments - Youdao's revenue decreased by 10% year-on-year to 1.3 billion yuan, with learning services revenue down 21% due to selective customer acquisition strategies [12] - NetEase Cloud Music reported a revenue of 1.9 billion yuan in Q4 2024, a 5% decline year-on-year, impacted by social entertainment business challenges, but online music revenue grew by 20% in H2 2024 [14][15]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1][4]. Core Insights - The company achieved a revenue of 105.3 billion yuan in 2024, with a year-on-year growth of 2.91%, and a net profit of 29.7 billion yuan, reflecting a year-on-year increase of 0.96% [4]. - In Q4 2024, the company reported a revenue of 26.7 billion yuan, a year-on-year decrease of 1.45% but a quarter-on-quarter increase of 2.05%, with a net profit of 8.8 billion yuan, showing a year-on-year growth of 33.18% and a quarter-on-quarter growth of 34.08% [4]. - The company is expected to benefit from new product cycles, with projected net profits for 2025, 2026, and 2027 at 34.2 billion yuan, 39 billion yuan, and 42.4 billion yuan respectively, corresponding to EPS of 10.7 yuan, 12.1 yuan, and 13.2 yuan [4]. Revenue and Profitability - The company's revenue from games and related value-added services in Q4 2024 was 21.2 billion yuan, with a year-on-year increase of 1.4% [4]. - The revenue from online music services in 2024 saw a 22% increase, with a gross margin of 33.7%, up by 7 percentage points year-on-year [6]. - The company’s operating profit for Youdao turned positive for the first time in 2024, driven by innovation and AI integration [6]. Product Performance - The game "Marvel Showdown" quickly topped the Steam global sales chart after its overseas launch, with over 10 million registered users within 72 hours, and currently surpassing 40 million [5]. - The game "Yanyun Sixteen Sounds" achieved over 3 million downloads within four days of its domestic launch, with total players exceeding 15 million within two weeks [5]. - The return of Blizzard games like "World of Warcraft" and "Hearthstone" has positively impacted the company's PC game revenue, with further growth expected from the recent return of "Overwatch" [5]. Financial Summary and Valuation Metrics - The company’s projected revenues for 2025, 2026, and 2027 are 120.97 billion yuan, 135.22 billion yuan, and 146.33 billion yuan respectively, with year-on-year growth rates of 14.9%, 11.8%, and 8.2% [7]. - The net profit projections for the same years are 34.23 billion yuan, 38.98 billion yuan, and 42.37 billion yuan, with corresponding year-on-year growth rates of 15.3%, 13.9%, and 8.7% [7]. - The company’s current price-to-earnings (P/E) ratios for 2025, 2026, and 2027 are 14.0, 12.3, and 11.3 respectively, indicating a favorable valuation outlook [7].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1][4][12] Core Views - The company achieved a revenue of 105.3 billion CNY in 2024, with a year-on-year growth of 2.91%, and a net profit of 29.7 billion CNY, reflecting a year-on-year increase of 0.96% [4] - The fourth quarter of 2024 saw a revenue of 26.7 billion CNY, a year-on-year decrease of 1.45% but a quarter-on-quarter increase of 2.05%, with a net profit of 8.8 billion CNY, marking a year-on-year increase of 33.18% and a quarter-on-quarter increase of 34.08% [4] - The company is expected to benefit from new product cycles, with projected net profits for 2025, 2026, and 2027 at 34.2 billion CNY, 39 billion CNY, and 42.4 billion CNY respectively, corresponding to EPS of 10.7 CNY, 12.1 CNY, and 13.2 CNY [4] Revenue and Profitability - The company's revenue from games and related value-added services in Q4 2024 was 21.2 billion CNY, with a year-on-year growth of 1.4% [4] - The company’s online music service revenue grew rapidly, with a 22% increase in subscription revenue for cloud music in 2024, achieving a gross margin of 33.7% [6] - The company’s net profit margin for 2024 was 28.2%, with a projected net profit margin of 28.3% for 2025 [7] Product Performance - The game "Marvel Showdown" launched overseas on December 6, 2024, quickly topped the Steam global sales chart, with over 10 million registered users within 72 hours, and currently surpassing 40 million [5] - The game "Yanyun Sixteen Sounds" saw over 3 million downloads within four days of its domestic launch, with total players exceeding 15 million within two weeks [5] - The return of Blizzard games such as "World of Warcraft" and "Hearthstone" has positively impacted the company's revenue, with the recent return of "Overwatch" expected to further boost earnings [5] Financial Summary and Valuation Metrics - The company’s projected revenues for 2025, 2026, and 2027 are 120.97 billion CNY, 135.22 billion CNY, and 146.33 billion CNY respectively, with year-on-year growth rates of 14.9%, 11.8%, and 8.2% [7] - The projected P/E ratios for 2025, 2026, and 2027 are 14.0, 12.3, and 11.3 respectively, indicating a favorable valuation outlook [7]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of $125.50, reflecting an expected return exceeding 15% over the next 12 months [2][26]. Core Insights - The company reported a stable performance in Q4 2024, with total revenue decreasing by 1.4% year-on-year to RMB 26.7 billion, aligning with market expectations. Operating profit increased by 13.9% year-on-year to RMB 7.8 billion, surpassing market expectations by 8% due to cautious control of sales and marketing expenses, which decreased by 33% year-on-year [1][2][3]. - For FY25, the company anticipates the launch of several new game titles to drive revenue growth, although total revenue forecasts for FY25-26 have been adjusted downwards by 2-3%. However, due to prudent operational expense control, the non-GAAP net income forecast for FY25-26 has been revised upwards by 2-3% [1][2][3]. Financial Summary - The company’s revenue is projected to grow from RMB 105.3 billion in FY24 to RMB 110.7 billion in FY25, representing a year-on-year growth of 7.5%. Adjusted net profit is expected to increase from RMB 33.5 billion in FY24 to RMB 36.0 billion in FY25, reflecting a growth rate of 7.5% [4][21]. - The operating profit margin is expected to improve, with a forecast of 30.4% for FY25, up from 29.1% in FY24, driven by effective control of sales and marketing expenses [3][11]. Segment Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, estimating the online gaming business at $11.05 billion, accounting for 88% of the total valuation. Other segments include Youdao at $1 million, Cloud Music at $380 million, and innovation and other businesses at $1.8 million, with net cash valued at $8.5 million [14][15].

Investment Rating - The report maintains a "BUY" rating for NetEase, with a target price of US$125.50, indicating a potential upside of 20.5% from the current price of US$104.17 [3][12]. Core Insights - NetEase's 4Q24 performance showed total revenue of RMB26.7 billion, down 1.4% YoY, but operating profit increased by 13.9% YoY to RMB7.8 billion, exceeding consensus estimates due to effective control of selling and marketing expenses [1][2]. - For FY25E, new game titles such as Marvel Rivals and Where Winds Meet are expected to drive revenue growth, despite a slight reduction in total revenue forecasts for FY25-26E by 2-3% [1][9]. - The company is focusing on prudent operational expense control, which is anticipated to support operating profit margin (OPM) improvement in FY25E [1][8]. Financial Summary - FY24 total revenue was RMB105.3 billion, with a gross margin of 62.5% and adjusted net profit of RMB33.5 billion, reflecting a YoY growth of 2.8% [2][19]. - Revenue projections for FY25E are set at RMB110.7 billion, with adjusted net profit expected to reach RMB36.0 billion, indicating a 7.5% growth [9][19]. - The company reported a significant improvement in OPM, which rose by 3.9 percentage points YoY to 29.2% in 4Q24 [1][8]. Business Segments - The online gaming segment remains the primary revenue driver, contributing 88% to the total valuation, with a projected valuation of US$110.5 billion based on a 15x EV/EBIT multiple [12][13]. - Non-gaming businesses, including Youdao and Cloud Music, are focusing on quality growth, although revenues in these segments have seen declines [1][8]. - The innovative businesses segment is valued at US$1.8 billion, reflecting a cautious approach to customer acquisition and prioritizing higher ROI engagements [12][13]. Market Position - NetEase's market capitalization stands at approximately US$66.7 billion, with a strong share performance over the past months, showing a 19% increase over the last three months [3][5]. - The company has a solid shareholder return strategy, having returned RMB20.0 billion to shareholders through dividends and share buybacks in FY24 [1][8].

Financial Data and Key Metrics Changes - Total net revenue for 2024 reached RMB 105.3 billion, representing a 2% increase year-over-year [52] - For Q4 2024, total revenue was RMB 26.7 billion, with net revenue from games and related services at RMB 21.2 billion, up 2% year-over-year [52] - Gross profit margin for the full year was 62.5%, while Q4 margin slightly decreased to 60.8% [56][57] Business Line Data and Key Metrics Changes - Net revenue from online games was RMB 80.4 billion for 2024, up 6% from 2023, with Q4 revenue at RMB 20.5 billion, up 5% year-over-year [52] - Youdao's net revenue for 2024 was RMB 5.6 billion, up 4% year-over-year, but declined 9.5% in Q4 due to a focus on long-term growth [54] - NetEase Cloud Music's revenue was RMB 8 billion for the full year, with a 5% decrease in Q4 [55] Market Data and Key Metrics Changes - PC client games achieved 17% year-over-year growth, with a 57% increase in Q4, driven by titles like NARAKA: BLADEPOINT [53] - Mobile games accounted for approximately 65% of total net revenue from online games in Q4 [53] Company Strategy and Development Direction - The company is focused on innovation and expanding its game portfolio, with plans to launch several new titles in 2025 and beyond [50][31] - There is a commitment to enhancing the gaming experience through continuous updates and player feedback [68][75] - The strategy includes leveraging AI to improve R&D efficiency and user engagement [98] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the gaming market's capacity to accommodate multiple successful titles, such as Marvel Rivals and Overwatch [85] - The company aims to revitalize existing franchises and maintain player engagement through new content and community interaction [90] Other Important Information - The effective tax rate was 15.3% for the full year, with a strong cash position of RMB 131.5 billion at year-end [63][61] - The Board of Directors approved a dividend of US$0.2424 per share for Q4 [64] Q&A Session Summary Question: Insights on data test achievements and competition in the shooter game market - Management reported positive feedback from large-scale testing and expressed confidence in their unique game design [67][69] Question: Monetization strategy for Where Winds Meet - The monetization strategy will focus on cosmetics and new content to enhance player experience, with plans for an overseas launch in 2025 [75][76] Question: Growth strategy for Marvel Rivals - The company plans to invest in eSports and cross-promotions with other media to expand the user base [80] Question: Expectations for Overwatch and balancing with Marvel Rivals - Expectations for Overwatch are to revitalize the product and reach new highs, with both games expected to coexist successfully in the market [85] Question: User growth trends for World of Warcraft and Hearthstone - Both titles are performing well post-launch, with plans for new content to maintain player engagement [90] Question: Future expansion strategy in overseas markets - The company is committed to supporting overseas studios to create content that meets local demands [97] Question: Impact of AI on game development - AI is expected to significantly enhance R&D efficiency and user engagement in gaming [98]

Financial Performance - NetEase's market capitalization was $67.2 billion as of February 19, 2025[8] - Net revenues for 4Q24 reached $3.7 billion, a 1.4% decrease year-over-year[8, 43] - Net income attributable to the company's shareholders for 4Q24 was $1.2 billion, a 33.2% increase year-over-year[8, 43] - Basic net income per ADS (GAAP) for 4Q24 was $1.89[8] - Net cash stood at $18.0 billion as of December 31, 2024[8] Segment Performance - Games and related value-added services net revenues for 4Q24 were $2.91 billion, with online games accounting for 97% of this revenue[10] - Youdao's net revenues for 4Q24 were $184 million, with a gross margin of 47.8%[18] - NetEase Cloud Music's net revenues for 4Q24 were $258 million, with a gross margin of 31.9%[22] - Innovative businesses and others' net revenues for 4Q24 were $313 million, with a gross margin of 37.8%[26] Shareholder Returns - Total dividends declared in FY2024 amounted to $1.651 billion[38] - Share buybacks in FY2024 totaled $1.230 billion[38] ESG Performance - NetEase received an AA rating from MSCI, indicating a leadership position in the media & entertainment industry[8, 41]

Financial Performance - NetEase's net revenue for Q4 2024 was RMB 26.7 billion (USD 3.7 billion), a decrease of 1.4% year-over-year[7] - Youdao's net revenue was RMB 1.3 billion (USD 183.6 million), a decrease of 9.5% year-over-year[7] - NetEase Cloud Music's net revenue was RMB 1.9 billion (USD 257.6 million), a decrease of 5.3% year-over-year[7] - For the fiscal year 2024, total net revenue was RMB 105.3 billion (USD 14.4 billion), up from RMB 103.5 billion in 2023[24] - Total revenue for the fiscal year ended December 31, 2023, was RMB 103,468,159, compared to RMB 105,295,236 in the previous fiscal year[54] Profitability - Gross profit for Q4 2024 was RMB 16.3 billion (USD 2.2 billion), a decrease of 3.3% year-over-year[14] - The net profit attributable to shareholders was RMB 8.8 billion (USD 1.2 billion), with a non-GAAP net profit of RMB 9.7 billion (USD 1.3 billion)[9] - The net profit attributable to shareholders in Q4 2024 was RMB 8.8 billion (USD 1.2 billion), compared to RMB 6.5 billion and RMB 6.6 billion in the previous quarter and year-over-year[22] - The net income from Youdao in 2024 was RMB 5.6 billion (USD 770.7 million), an increase from RMB 5.4 billion in 2023[25] - The basic earnings per share for Q4 2024 was USD 0.38, compared to USD 0.28 in the previous quarter and year-over-year[22] Operating Expenses - Operating expenses totaled RMB 8.5 billion (USD 1.2 billion), a decrease of 15.1% year-over-year[7] - Total operating expenses in Q4 2024 were RMB 8.5 billion (USD 1.2 billion), a decrease from RMB 9.3 billion and RMB 10 billion in the previous quarter and year-over-year, respectively[19] - Research and development expenses for the year ended December 31, 2023, totaled RMB 16,484,910, compared to RMB 17,524,812 for the year ended December 31, 2024[49] Cash and Assets - As of December 31, 2024, the company's net cash balance was RMB 131.5 billion (USD 18 billion), up from RMB 110.9 billion at the end of 2023[34] - Cash and cash equivalents rose significantly from RMB 21,428,902 in 2023 to RMB 51,383,310 in 2024, marking an increase of about 140%[47] - Total assets increased from RMB 185,924,978 in 2023 to RMB 195,991,550 in 2024, reflecting a growth of approximately 5.74%[47] - The total current assets increased from RMB 142,692,585 in 2023 to RMB 153,324,656 in 2024, reflecting a growth of approximately 7.5%[47] Shareholder Returns - The company declared a quarterly dividend of USD 0.24405 per share, payable on March 17, 2025[35] - The company announced a share repurchase plan approved by the board on November 17, 2022, allowing for the repurchase of up to $5 billion of its American Depositary Shares and common stock over a period of 36 months[37] - As of December 31, 2024, the company has repurchased approximately 21.2 million American Depositary Shares for a total of about $1.9 billion under this plan[37] Business Development - The company launched several new games globally, including "Marvel's Contest of Champions," which quickly topped the Steam global sales chart[9] - Youdao achieved a 10.3% year-over-year increase in operating profit for Q4 2024, marking its first positive annual operating profit[12] - NetEase Cloud Music continues to expand its subscription base, driving its music-centric commercialization process[12] - The company plans to expand its market presence and invest in new product development to drive future growth[53] Research and Development - The company is focusing on enhancing its technological capabilities through ongoing research and development initiatives[53] - The company's self-developed team focuses on mobile, PC, and console game development, contributing to a rich product matrix and enhancing user engagement[41] Financial Metrics - The effective tax rate for Q4 2024 was 13.4%, down from 16.1% in the previous quarter and 13.8% year-over-year[21] - The company uses non-GAAP financial metrics, such as net profit attributable to shareholders, to assess operational performance and business planning[45] - Non-GAAP financial metrics exclude stock-based compensation expenses, providing a clearer view of operational performance[45] - The company acknowledges the limitations of non-GAAP financial metrics and encourages a comprehensive review of its financial information[46]