Investment Rating - The report assigns a "Buy" rating for the company with a target price of $125.00, indicating a potential upside of 23.44% for the US stock and 21.64% for the HK stock [1]. Core Insights - The company's revenue growth is driven by Blizzard games, with a notable increase in PC game revenue, while mobile game revenue is anticipated to improve with new product launches [2][3]. - The forecasted revenue CAGR for the company from 2025 to 2027 is 11.4%, with Non-GAAP net profit CAGR expected at 10.5% [2]. Financial Performance Summary - Total revenue for the fiscal year ending December 31 is projected to grow from $14,232 million in 2023 to $17,966 million by 2027, reflecting a compound annual growth rate (CAGR) of 6.2% [2]. - Non-GAAP net profit is expected to increase from $4,485 million in 2023 to $5,633 million in 2027, with Non-GAAP earnings per ADS rising from $6.9 to $8.5 over the same period [2]. - The company achieved a GAAP net profit of 87.7 billion RMB in Q4 2024, a year-on-year increase of 33.2%, exceeding Bloomberg consensus estimates [2]. Game Segment Performance - The revenue from games and related value-added services grew by 1.5% year-on-year to 212.4 billion RMB, with PC game revenue increasing by 56.6% to 71.3 billion RMB, driven by titles like "World of Warcraft" and "Hearthstone" [2]. - Mobile game revenue, however, declined by 10.5% to 134 billion RMB due to a lack of new product releases, but upcoming titles are expected to boost this segment [2]. Other Business Segments - Youdao is projected to achieve its first profitable year in 2024, with revenue expected to grow by 4.4% to 56.3 billion RMB, driven by AI subscription services [2]. - Cloud Music's revenue for 2024 is forecasted to reach 79.5 billion RMB, with a year-on-year growth of 1.1%, supported by increased subscription revenue and cost control measures [2].

Core Viewpoint - The article discusses the controversial nature of the video game industry from an ESG perspective, highlighting the psychological dependency it creates among players, particularly minors, and the need for companies like NetEase to take social responsibility seriously [3][6][10]. Group 1: Company Overview - NetEase is primarily a video game company, with net revenue of 105.3 billion yuan (approximately 14.4 billion USD) for the fiscal year ending December 31, 2024, of which 83.6 billion yuan (about 11.5 billion USD) comes from games and related services, accounting for around 80% of total revenue [1]. - The company has expanded its gaming ecosystem and operates several popular mobile and PC games both in China and globally [1]. Group 2: Controversial Nature of Video Games - Video games are considered a controversial industry due to their addictive nature, similar to tobacco, alcohol, and gambling, which can lead to "Gaming Disorder" recognized by the World Health Organization (WHO) [3][4]. - WHO outlines three diagnostic criteria for gaming disorder, including inability to control gaming behavior, prioritizing gaming over other interests, and continuation of gaming despite negative consequences [3]. Group 3: Regulatory Environment - Various countries have implemented restrictions on video game advertising, particularly aimed at protecting minors, such as mandatory health warnings in South Korea and prohibitions on misleading advertising in France [4][5]. - In the U.S., there are strict regulations on collecting personal information from users under 13, requiring parental consent for advertising [5]. Group 4: NetEase's ESG Reporting - NetEase's 2023 ESG report lacks acknowledgment of the negative impacts of gaming addiction, failing to mention "gaming addiction" at all, which raises questions about the report's reliability and completeness [10][11]. - The report does include a section on "Minor Protection," detailing initiatives like the "Minor Protection Center" and "AI Minor Protection System," but lacks data on the effectiveness of these measures [13][14]. Group 5: Social Responsibility - The article argues that NetEase should take more proactive steps in promoting responsible gaming and addressing addiction issues, similar to how other industries have taken responsibility for their products [14].

Core Viewpoint - The rise of PC and console gaming is becoming increasingly evident, with significant growth in revenue and user engagement, particularly driven by successful titles and multi-platform strategies [2][4][8]. Group 1: Company Performance - NetEase reported a revenue of 105.3 billion yuan for 2024, with a year-on-year growth of 1.73%, and its gaming segment generated 83.6 billion yuan, growing by 2.45% [2]. - The growth in NetEase's gaming business is attributed to stable performances from flagship products like "Naraka: Bladepoint," "World of Warcraft," and "Hearthstone" [2]. - The fourth quarter saw a 57% year-on-year increase in revenue from PC and console games, significantly contributing to NetEase's overall revenue growth [2]. Group 2: Market Trends - The gaming industry is witnessing a resurgence in PC gaming, with Tencent's new title "Delta Force" generating 70% of its revenue from the PC platform [4]. - The anticipated release of "Black Myth: Wukong" has reignited interest in AAA PC games, leading to increased market enthusiasm for the segment [4][8]. - Over two-thirds of users who purchased "Black Myth" also bought other console games, indicating a shift in consumer behavior towards multi-platform gaming [4]. Group 3: Industry Dynamics - The demand for high-quality graphics and gameplay is rising, pushing developers to enhance their offerings across platforms [5][8]. - Multi-platform connectivity has become a new industry consensus, with games like "Genshin Impact" leading the way in cross-platform integration [5][6]. - Despite the growth in PC gaming, mobile games still dominate the revenue landscape, accounting for 73% of the total gaming revenue in 2023, highlighting the need for a balanced approach [9].

Investment Rating - The report maintains a "Buy" rating for the company [10] Core Insights - The company achieved revenue of 26.75 billion yuan in Q4 2024, a year-over-year decrease of 1.4% but a quarter-over-quarter increase of 2.1%. The gross profit was 16.27 billion yuan, with a gross margin of 60.8%, down 1.2 percentage points year-over-year. Adjusted net profit reached 9.68 billion yuan, reflecting a year-over-year increase of 31.2% and a net margin of 36.2%, up 9.2 percentage points year-over-year [6][10] - The launch of the PC game "Marvel Showdown" on December 6, 2024, significantly boosted user engagement, with over 10 million registered users within 72 hours and a current user base exceeding 40 million. The new game "Yanyun Sixteen Sounds" also performed well, achieving over 3 million downloads in four days and topping the iOS download charts for two weeks [6][10] - The company has a strong pipeline of games, including "Destiny: Rising" and "Marvel Secret Frenzy," which enhances its product matrix and long-term operational capabilities [8] - The profitability of the cloud music and Youdao businesses is improving, with cloud music subscription revenue growing by 22% year-over-year and a gross margin of 33.7%, up 7 percentage points year-over-year. Additionally, Youdao achieved its first annual operating profit due to AI integration [9] Financial Summary - The company’s projected revenues for CY 2025, 2026, and 2027 are 113.44 billion yuan, 122.35 billion yuan, and 132.98 billion yuan, respectively. The projected net profits (Non-GAAP) for the same years are 35.91 billion yuan, 39.16 billion yuan, and 42.96 billion yuan, respectively [10][13] - Key financial metrics include a return on equity (ROE) of 24% in 2024, projected to decline to 18% by 2027. The earnings per share (EPS) is expected to grow from 10.37 yuan in 2024 to 13.40 yuan in 2027 [13][15]

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].