NTES(09999) 广发证券·2024-10-02 04:39Company Rating - Buy/Buy rating for NetEase (NTES.O) and NetEase-S (09999.HK) with a current price of 132.34/206.01 HKD [1] Core Views - NetEase reported 24Q2 revenue of 254.9 billion RMB, a YoY increase of 6% but a QoQ decrease of 5% [2] - Gross margin improved by 3.08 percentage points to 62.9% in 24Q2 [2] - GAAP net profit attributable to shareholders was 6.759 billion RMB, while Non-GAAP net profit was 7.819 billion RMB, with a Non-GAAP net margin of 30.68% [2] - Game-related value-added services revenue reached 200.56 billion RMB, a YoY increase of 6.7%, with mobile games contributing 76.4% of online game revenue [2] - New games such as "World Beyond," "Naraka: Bladepoint Mobile," and "Marvel Duel" contributed to performance growth [2] - The company has a strong pipeline of games, including "Marvel Rivals" and "Where Winds Meet," expected to launch within the year [2] Business Performance - Mobile games revenue grew by 16.06% YoY to 147.25 billion RMB, while PC games revenue slightly declined by 0.05% to 45.49 billion RMB [2] - Classic mobile games like "Fantasy Westward Journey" and "Identity V" maintained strong performance, with "Identity V" showing significant improvement in revenue rankings [2][9] - NetEase's Youdao segment reported a 9.54% YoY increase in revenue to 1.322 billion RMB, with a focus on AI+education driving future growth [11] - Cloud Music's H1 revenue reached 4.07 billion RMB, exceeding expectations, with a 48% YoY increase in gross profit and a 176% YoY increase in net profit [12] Financial Projections - NetEase's total revenue is projected to be 1.09 trillion RMB in 2024, 1.225 trillion RMB in 2025, and 1.336 trillion RMB in 2026 [2] - Non-GAAP net profit is expected to be 33.3 billion RMB in 2024, 37.2 billion RMB in 2025, and 40.7 billion RMB in 2026 [2] - The SOTP valuation method yields a fair value of 132.34 per ADS (US) and 206.01 HKD per share (HK) [2] Game Pipeline and Strategy - NetEase has a robust game pipeline, including "Marvel Rivals" and "Where Winds Meet," which are expected to launch within the year [2] - The return of Blizzard games in China is expected to provide additional support to the PC gaming segment [2] - Long-term growth is supported by the company's strong R&D capabilities and its ability to consistently produce high-quality games [2] Segment Valuation - The gaming segment is valued at 574.5 billion RMB based on a 20x PE multiple [16] - Youdao is valued at 3.1 billion RMB with a 1x PS multiple [17] - Cloud Music is valued at 13.2 billion RMB with a 16x PE multiple [18] - The total SOTP valuation for NetEase is 596.6 billion RMB, translating to 850 billion USD or 661.5 billion HKD [18]