NTES(US:NTES)2024-10-17 02:37Investment Rating - The investment rating for the company is "Buy" with a target price of $113.00, indicating a potential upside of 32.9% from the current price of $85.01 [1][8]. Core Insights - The company is expected to face challenges in the third quarter of 2024, with a projected revenue decline of 4% year-on-year to 26.3 billion RMB, and an adjusted net profit of 7.4 billion RMB, which is lower than previous expectations [2]. - The gaming segment is anticipated to recover in the fourth quarter, driven by the launch of new games, which could improve mobile game performance [2]. - The valuation remains attractive, with the current price corresponding to a P/E ratio of 12x for 2024 and 11x for 2025, below the industry average [2]. Financial Summary - Revenue is projected to grow from 96.5 billion RMB in 2022 to 128.4 billion RMB by 2026, with a compound annual growth rate (CAGR) of approximately 10.2% [3][10]. - Net profit is expected to increase from 22.8 billion RMB in 2022 to 38.3 billion RMB in 2026, reflecting a strong growth trajectory [3][10]. - The company’s earnings per share (EPS) is forecasted to rise from 34.60 RMB in 2022 to 59.30 RMB in 2026, with a notable increase in the dividend yield from 1.7% in 2022 to 2.6% in 2026 [3][10]. Market Performance - The company’s market capitalization is approximately $106.1 billion, with a 52-week high of $118.47 and a low of $76.42 [5]. - The stock has experienced a year-to-date decline of 8.75% [5]. Game Segment Analysis - The PC gaming segment is expected to show positive growth, while mobile gaming is under pressure due to high year-on-year comparisons from the previous year [2]. - New game launches, including "蛋仔滑滑" and "燕云十六声," are anticipated to boost mobile game revenue in the fourth quarter [2]. Valuation Metrics - The company is currently trading at a P/E ratio of 12.0 for 2023, which is lower than the industry average, suggesting potential for price appreciation as new games are released [3][10].