Investment Rating - The investment rating for the company is "Outperform the Market" [3][24][13] Core Insights - In Q1 2024, the company achieved a revenue of 26.9 billion yuan, representing a year-on-year growth of 7%. The growth was primarily driven by mobile gaming and Youdao, partially offset by a decline in PC gaming revenue [22][29] - The company's overall gross margin improved to 63%, up by 4 percentage points year-on-year, with gaming and value-added services gross margin at 69.5%, an increase of 3 percentage points [22][27] - Non-GAAP net profit for Q1 2024 was 8.5 billion yuan, a 12% increase year-on-year, with a Non-GAAP net profit margin of 32%, up by 1 percentage point [22][29] Summary by Sections Gaming Business - Online gaming revenue reached 20.43 billion yuan, a 10% increase year-on-year, with mobile gaming revenue at 16.1 billion yuan, growing by 19% due to strong performances from titles like "Party of Eggs" and "Identity V" [22][30] - PC gaming revenue decreased by 15% to 4.4 billion yuan, mainly due to the suspension of Blizzard games. The company has renewed its distribution agreement with Blizzard to reintroduce their games to the Chinese market [22][30] - The company plans to complete adjustments to "Fantasy Westward Journey" in the first half of this year to enhance long-term player engagement [22][31] Youdao - Youdao's net revenue for Q1 2024 was 1.4 billion yuan, a 20% increase year-on-year, with advertising revenue doubling to 490 million yuan, marking a historical high [22][32] - The strategic focus on digital content services and AI-driven subscription services has led to profitability over two consecutive quarters [22][32] Cloud Music - Cloud Music reported a net revenue of 2 billion yuan in Q1 2024, a 4% increase year-on-year, with a gross margin of 37.97%, up by 15.5 percentage points due to improved cost control [23][33] Financial Forecast - The company maintains a robust product pipeline with expected releases such as "Eternal Return" and "Yanyun Sixteen Sounds" in the second half of the year. The adjusted net profit forecasts for 2024-2026 are 36 billion, 38.6 billion, and 41.2 billion yuan respectively [22][13][26]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of USD 117.00, indicating a potential upside of 23.5% from the current closing price of USD 94.74 [2][15][21]. Core Insights - The company's Q1 performance met expectations, with revenue increasing by 7% year-on-year to RMB 26.9 billion, aligning with Bloomberg's forecast. Adjusted net profit rose by 12% year-on-year to RMB 8.5 billion, exceeding Bloomberg's expectations by 2% [2][4]. - The gaming segment showed varied performance, with mobile game revenue increasing by 19% year-on-year, while PC game revenue decreased by 15%. The overall gaming gross margin improved by 2.8 percentage points to 69.5% [2][3][4]. - The company has several new game launches planned for the summer, which are expected to drive further growth in mobile game revenue [3][13]. Summary by Sections Financial Performance - Q1 revenue was RMB 26.9 billion, a 7% increase year-on-year, with adjusted net profit at RMB 8.5 billion, a 12% increase [2][6]. - Marketing expenses rose by 38% to RMB 4 billion, accounting for 15% of revenue [2][6]. - Game revenue breakdown: mobile games up 19%, PC games down 15%, and console games up 10% [2][6]. Future Outlook - The company expects a 10% increase in gaming revenue for 2024, despite a 2% downward adjustment in overall revenue forecasts due to short-term adjustments in PC gaming [4][6]. - The target price was adjusted from USD 127 to USD 117, maintaining the "Buy" rating based on a 2024 gaming business P/E ratio of 18x [4][21]. Game Development and Releases - The company has announced over 10 new games and updates across various genres, including MMO and action games, with several titles set to launch in the summer of 2024 [13][3].

Investment Rating - The report maintains a "Buy" rating for the company [4]. Core Views - The company reported Q1 2024 revenue of 26.852 billion RMB, a year-over-year increase of 7.21%. The gross profit for Q1 was 17 billion RMB, with a gross margin of 63.37% [2][8]. - Mobile gaming showed steady growth, while PC gaming experienced a decline. Q1 gaming and related value-added services revenue was 21.46 billion RMB, up 7% year-over-year, with mobile games accounting for 78.6% of online gaming revenue [2][19]. - The company has a strong pipeline of self-developed games, with several titles set to launch in the coming months, which is expected to bolster future performance [2][19]. Summary by Sections Financial Performance - Q1 2024 revenue was 26.852 billion RMB, with a gross profit of 17 billion RMB and a gross margin of 63.37%. Sales expenses were 4.022 billion RMB, while R&D expenses were 4.175 billion RMB, representing 15.55% of revenue [2][8][19]. - The company reported a GAAP net profit of 7.634 billion RMB and a Non-GAAP net profit of 8.511 billion RMB, with Non-GAAP net profit margin at 31.70% [2][19]. Gaming Business - The gaming segment generated 21.46 billion RMB in revenue, with online gaming revenue at 20.43 billion RMB, reflecting a 9.84% increase year-over-year. Mobile games contributed 16.058 billion RMB, up 19.41%, while PC games saw a 15.15% decline [2][19]. - New game launches such as "射雕" and "世界之外" had limited impact, but existing titles like "逆水寒" and "蛋仔派对" performed well during the Spring Festival [2][19]. Future Outlook - The company expects to gradually recover from the impact of PC gaming adjustments, with Blizzard's return to the Chinese market expected to support this segment [2][19]. - Revenue projections for 2024-2026 are set at 111.9 billion RMB, 126.7 billion RMB, and 138.9 billion RMB, respectively, with Non-GAAP net profits expected to be 34.5 billion RMB, 38.7 billion RMB, and 42.4 billion RMB [2][19][25].

Investment Rating - The report maintains a "Buy" rating for the company with a target price adjusted to HKD 173 / USD 111, reflecting a potential upside of 22% from the current price of HKD 141.5 / USD 94.74 [3][4][12] Core Insights - The company's Q1 2024 revenue reached RMB 26.9 billion, a year-on-year increase of 7.2%, slightly above market expectations. The adjusted net profit was RMB 8.5 billion, up 31.7% year-on-year, also exceeding market forecasts [3][6] - The gaming segment continues to show strong growth, with game revenue at RMB 20.4 billion, a 10% increase year-on-year, driven by popular titles such as "逆水寒" and "蛋仔派对" [3][6] - The company is set to launch several new games in Q3, which are expected to act as catalysts for growth despite recent adjustments to existing games [3][6] Financial Performance Summary - Revenue projections for FY24E have been slightly adjusted downwards by 1% to RMB 111.6 billion, with adjusted net profit forecasted at RMB 33.6 billion [3][6] - The company’s gross margin improved to 63.4%, up 3.9 percentage points year-on-year, while the adjusted net margin increased to 31.7%, up 1.5 percentage points [3][6] - The report outlines a steady growth trajectory with revenue expected to reach RMB 130.1 billion by FY26E, with a compound annual growth rate (CAGR) of 6.5% [6][10]

Investment Rating - The report maintains a "Buy" rating for the company [4] Core Insights - In Q1 2024, the company reported revenue of 26.85 billion (yoy +7.2%, qoq -1.1%), with a decline attributed to reduced income from Youdao, while year-on-year growth was driven by increased mobile game net revenue [1] - The gross margin for Q1 was 63.4% (yoy +3.9pp, qoq +1.4pp), primarily boosted by growth in cloud music [1] - Non-GAAP net profit attributable to the parent company was 8.51 billion (yoy +12.5%, qoq +15.3%), while GAAP net profit was 7.63 billion (yoy +13%, qoq +16%) [1] - The total revenue from games and related value-added services was 21.46 billion (yoy +6.9%, qoq +2.6%), with growth driven by new game releases and continuous content innovation [1] - The company has a rich product pipeline, with several new games expected to launch in 2024, which are anticipated to drive revenue growth [2] Financial Summary - The company forecasts net profit attributable to the parent company for 2024-2026 to be 33.6 billion, 38.5 billion, and 41.7 billion respectively [2] - The target price is set at 164.63 HKD / 148.82 CNY, based on a sum-of-the-parts (SOTP) valuation [2] - The company’s revenue is projected to grow from 117.6 billion in 2024 to 146.6 billion in 2026, with a compound annual growth rate (CAGR) of 7.63% [6][9]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Insights - The report highlights that the mobile game "Naraka: Bladepoint" is expected to drive future growth for the company [2] - In Q1 2024, the company's revenue was 26.852 billion yuan, a year-on-year increase of 7.2%, which was in line with market expectations [2][6] - The net profit (Non-GAAP) for Q1 2024 was 8.511 billion yuan, representing a year-on-year growth of 12.5%, exceeding market expectations [2][6] - The company has a strong pipeline of games, including "Naraka: Bladepoint" mobile version and "Yanyun Sixteen Sounds," which are anticipated to contribute to future revenue [3][4] Financial Performance Summary - For the fiscal year 2023, the company reported total revenue of 103.468 billion yuan, with a year-on-year growth of 7.2% [4] - The projected revenues for 2024, 2025, and 2026 are 116.792 billion yuan, 144.093 billion yuan, and 162.964 billion yuan, respectively, indicating a growth trajectory [4][7] - The company's net profit (Non-GAAP) for 2024 is projected to be 38.032 billion yuan, with a year-on-year growth of 16.6% [4][7] - The report indicates a consistent increase in gross profit, with a projected gross profit of 73.594 billion yuan for 2024, reflecting a year-on-year growth of 16.7% [4][7] Game and Service Revenue - Revenue from games and related value-added services for Q1 2024 was 21.460 billion yuan, a year-on-year increase of 7.0% [2][6] - The company continues to see strong performance from existing titles such as "Identity V" and "Onmyoji," which maintain a loyal user base [2][3] - The report notes that the company is expanding its game offerings in more regions, enhancing its market presence [2][3] Future Outlook - The company is expected to launch several highly anticipated games in the coming quarters, which are likely to boost revenue [2][3] - The report maintains a positive outlook on the company's long-term commercialization capabilities, driven by its strong game portfolio and user engagement [2][3]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Insights - The company's revenue for Q1 2024 was 26,852 million yuan, representing a year-on-year growth of 7.2%, which is in line with market expectations [4][7] - Non-GAAP net profit reached 8,511 million yuan, up 12.5% year-on-year, exceeding market expectations [4][7] - The gaming and related value-added services revenue was 21,460 million yuan, growing 7.0% year-on-year [4] - The company has a strong pipeline of products expected to drive future growth, including new game releases and updates to existing titles [4] Financial Performance Summary - Revenue for 2024E is projected at 103,468 million yuan, with a year-on-year growth of 12.9% [5] - Non-GAAP net profit for 2024E is estimated at 32,608 million yuan, reflecting a 16.6% increase year-on-year [5] - The company maintains a healthy ROE of 24% for 2024E [5] - The P/E ratio is projected to decrease from 16.1 in 2023 to 10.9 in 2024E, indicating potential undervaluation [5] Game and Service Performance - The company continues to see strong performance from existing games such as "Identity V" and "Onmyoji," which have maintained popularity among players [4] - New game releases, including "World Beyond," have quickly gained traction, reaching the top of the iOS download charts in China [4] - The company is expanding its gaming portfolio with anticipated releases like "Yanyun Sixteen Sounds" and updates to "Nirvana in Fire" mobile game [4] Future Outlook - The company expects to achieve Non-GAAP net profits of 38,032 million yuan in 2025E and 44,192 million yuan in 2026E, indicating a positive growth trajectory [4][5] - The gaming sector remains a key growth driver, supported by a loyal user base and continuous content updates [4]

Investment Rating - The investment rating for the company is "Buy" (maintained) [2][6] Core Views - The company has shown steady growth in performance, with a continuous improvement in profitability. The first quarter of 2024 saw a revenue of 26.9 billion yuan, a year-on-year increase of 7.2% and a quarter-on-quarter decrease of 1.1%. The net profit attributable to shareholders was 7.6 billion yuan, reflecting a year-on-year increase of 13.0% and a quarter-on-quarter increase of 16.0% [6] - The company is expected to benefit from the launch of several blockbuster games, which will drive revenue growth. The forecast for net profit from 2024 to 2026 is 33.9 billion yuan, 37.3 billion yuan, and 40.4 billion yuan respectively, with corresponding EPS of 10.5, 11.6, and 12.6 yuan [6][9] - The company maintains a high level of R&D investment, with a focus on integrating AI models into various sectors, which is expected to enhance efficiency and quality across its entertainment, education, and industrial segments [8] Summary by Sections Financial Performance - In Q1 2024, the company achieved a revenue of 26.9 billion yuan, with a gross margin of 63.37%, up 3.89 percentage points year-on-year. The net margin was 28.43%, an increase of 1.46 percentage points year-on-year [6] - The company’s total revenue for 2022 was 96.5 billion yuan, increasing to 103.5 billion yuan in 2023, with projections of 118.1 billion yuan for 2024, reflecting a year-on-year growth of 14.2% [9] Game Development and Releases - The company has several successful games, including "Dream of the Westward Journey" and "Identity V," which have reached record revenues. New games like "World Beyond" and "Seven Days World" are also gaining traction [7] - The company plans to accelerate the global release of new self-developed games, with significant titles set to launch in the second half of 2024 [7] R&D and Innovation - The company has maintained a R&D investment intensity exceeding 15% for seven consecutive quarters, focusing on AI integration to enhance productivity and reduce costs across its business segments [8]

Investment Rating - The report maintains a **Buy** rating for NetEase (NTES US) with a target price of **$131.5**, slightly adjusted from the previous target of **$130.5** [4][5] Core Views - NetEase's Q1 2024 revenue grew **7% YoY** to **RMB 26.9 billion**, in line with expectations, while non-GAAP net income grew **12% YoY** to **RMB 8.5 billion**, **2% above consensus**, driven by better-than-expected performance in gaming and music businesses [4] - The report is optimistic about **game revenue growth re-accelerating in 2H24E**, supported by a strong pipeline of new games, including *Where Winds Meet* (July 2024) and *Marvel Rivals* (3Q24E) [4] - Non-gaming businesses, particularly cloud music and Youdao, showed **quality growth**, with cloud music revenue up **4% YoY** to **RMB 2.03 billion** and Youdao revenue up **20% YoY** to **RMB 1.39 billion** [4] - Gross profit margin (GPM) improved by **3.9 percentage points YoY** to **63.4%**, driven by strong expansion in gaming and music GPM [4] - Operating profit margin (OPM) is expected to increase from **26.8% in FY23** to **28.6% in FY24E** and **29.7% in FY25E**, supported by GPM expansion and efficiency improvements [4] Financial Forecasts - Revenue is projected to grow from **RMB 103.5 billion in FY23** to **RMB 126.9 billion in FY26E**, with a **CAGR of 7.1%** [4][14] - Adjusted net income is expected to grow from **RMB 32.6 billion in FY23** to **RMB 39.3 billion in FY26E**, with a **CAGR of 6.4%** [4][14] - Gross margin is forecasted to improve from **60.9% in FY23** to **64.2% in FY26E**, while operating margin is expected to rise from **26.8% in FY23** to **30.8% in FY26E** [4][14] Valuation - The **Sum-of-the-Parts (SOTP)** valuation method is used, with the target price of **$131.5** comprising: - **Online gaming business**: **$122.2** (92.9% of total valuation), based on **14x 2024E EV/EBIT** [19] - **Cloud music business**: **$3.0** (2.3% of total valuation), based on **2.9x 2024E EV/Revenue** [8] - **Youdao business**: **$2.0** (1.5% of total valuation), based on **2.8x 2024E EV/Revenue** [1] - **Innovative businesses**: **$2.3** (1.8% of total valuation), based on **1.2x 2024E EV/Revenue** [20] - **Net cash**: **$2.0** [8] Industry Comparison - NetEase's gaming business valuation multiple (**14x 2024E EV/EBIT**) is in line with industry peers such as Tencent (**17x**) and Electronic Arts (**16x**) [26] - The cloud music business valuation multiple (**2.9x 2024E EV/Revenue**) is comparable to Spotify (**3.3x**) and Tencent Music Entertainment (**5.3x**) [26]

Investment Rating - The report maintains a "BUY" rating for the company, with a target price of US$131.50, representing a potential upside of 38.8% from the current price of US$94.74 [4][5]. Core Insights - The company reported a total revenue increase of 7% year-over-year to RMB26.9 billion in 1Q24, aligning with estimates. Non-GAAP net income grew by 12% year-over-year to RMB8.5 billion, exceeding consensus estimates due to strong performance in the games and music business [5]. - The forecast for FY24-26 non-GAAP net income has been raised by 2-5% to reflect better-than-expected gross profit margin (GPM) expansion [5]. - Game revenue is expected to accelerate in the second half of 2024, supported by a strong game pipeline, despite potential short-term volatility from game adjustments and competition [5]. Financial Summary - Revenue projections for FY24E, FY25E, and FY26E are RMB111.2 billion, RMB119.4 billion, and RMB126.9 billion, respectively, with a slight decrease of 0.7% from previous estimates [1]. - Gross profit is expected to reach RMB70.3 billion in FY24E, with a gross margin of 63.2%, reflecting a 1.5% increase from prior estimates [1]. - Adjusted net profit is projected at RMB33.9 billion for FY24E, with an adjusted net margin of 30.5% [1]. - The company’s cash flow from operations is expected to grow from RMB35.3 billion in 2023A to RMB34.9 billion in 2024E, indicating strong operational efficiency [3]. Growth and Profitability - Revenue growth rates are projected at 7.5% for FY24E, 7.3% for FY25E, and 6.3% for FY26E, with adjusted net profit growth rates of 4.1%, 7.3%, and 7.9% for the same periods [19]. - The overall gross profit margin is anticipated to improve to 63.4% in 1Q24, driven by strong GPM expansion in the games and music sectors [5]. Valuation - The sum-of-the-parts (SOTP) valuation methodology indicates a valuation of US$122.2 billion for the online game business, which constitutes 92.9% of the total valuation [26]. - The valuation for the Cloud Music business is estimated at US$3.0 billion, based on a multiple of 2.9x 2024E EV/revenue, aligning with industry averages [6][27].