NTES(HK:09999) Guohai Securities·2024-08-26 13:44Investment Rating - The report assigns a rating of "Accumulate" (downgraded) for the company [1]. Core Views - The overall performance of the company remains robust, with a focus on the release schedule of upcoming game products [1]. - The company achieved a revenue of 25.485 billion RMB in Q2 2024, reflecting a year-on-year increase of 6.1% but a quarter-on-quarter decrease of 5.1% [4]. - The net profit attributable to shareholders was 6.759 billion RMB, down 18.0% year-on-year and 11.5% quarter-on-quarter [4]. - The non-GAAP net profit attributable to shareholders was 7.819 billion RMB, down 13.3% year-on-year and 8.1% quarter-on-quarter [4]. - The gross margin decreased to 62.9%, with a year-on-year increase of 3.1 percentage points and a quarter-on-quarter decrease of 0.4 percentage points [2]. Financial Performance - The gaming and value-added services segment generated revenue of 20.1 billion RMB in Q2 2024, up 6.7% year-on-year but down 6.5% quarter-on-quarter, with a gross margin of 69.5% [3]. - Mobile game revenue saw a strong year-on-year growth of 16.1%, while PC game revenue declined by 0.1% due to base effects [3]. - Notable games such as "Party of Eggs," "Identity V," and "Rate the Land" continue to attract players, with "Naraka: Bladepoint" achieving record daily active users [3]. - The company has several major products lined up for release in the second half of the year, including "Yanyun Sixteen Sounds" and "Marvel: Battle Lines" [3]. Other Business Segments - NetEase Youdao reported Q2 2024 revenue of 1.32 billion RMB, a year-on-year increase of 9.5%, with significant growth in digital content services and online marketing services [3]. - NetEase Cloud Music achieved revenue of 2.04 billion RMB in Q2 2024, up 4.7% year-on-year, with a gross margin improvement to 32% [3]. - The innovation and other business segment generated revenue of 2.07 billion RMB, a slight increase of 0.5% year-on-year [3]. Earnings Forecast and Valuation - The company is expected to achieve revenues of 104.7 billion RMB, 115.9 billion RMB, and 124.9 billion RMB for FY2024-2026, respectively [6]. - Adjusted net profits are projected to be 31.9 billion RMB, 36.0 billion RMB, and 39.9 billion RMB for the same period [6]. - The target price is set at 144 HKD, maintaining a "Buy" rating based on a sum-of-the-parts valuation [6].