NTES(09999) 浦银国际证券·2024-11-15 14:06Investment Rating - The report maintains a "Buy" rating for the company, with a target price adjusted to HKD 160 / USD 103, reflecting a potential upside of 34% and 22% respectively from current prices [3][6][18]. Core Insights - The company's overall performance in Q3 2024 was slightly below expectations, with revenue of RMB 26.2 billion, a year-on-year decline of 3.9% but a quarter-on-quarter increase of 2.8%. This was 1.4% lower than market expectations. The adjusted net profit was RMB 7.5 billion, also below market expectations by 5.9% [1][3]. - The gaming segment showed mixed results, with total gaming revenue of RMB 20.2 billion, a year-on-year decline of 1% but a quarter-on-quarter increase of 5%. Mobile game revenue decreased by 10% due to high base effects from last year, while PC game revenue increased by 29% [2][3]. - The company is expected to see short-term growth driven by strong performance in PC games, particularly with upcoming titles and the return of Blizzard games to the Chinese market [2][3]. Financial Performance Summary - Q3 2024 revenue was RMB 26.2 billion, with a gross margin of 62.9%, up 0.7 percentage points year-on-year. The adjusted net profit margin was 28.6% [1][3]. - Revenue forecasts for FY24E and FY25E have been adjusted to RMB 105.6 billion and RMB 112.4 billion respectively, with adjusted net profit forecasts of RMB 31.9 billion and RMB 33.4 billion [3][4]. - The gaming segment's gross margin slightly decreased to 68.8%, while the overall gross margin improved [2][3]. Market Expectations - The target price reflects a P/E ratio of 14.3x for FY25E, indicating confidence in the company's long-term gaming operations and potential for new game releases [3][4]. - The stock is currently trading at HKD 119.5, with a 52-week range of HKD 116 to HKD 185.7, and a market capitalization of HKD 428.9 billion [5][6].