NTES(09999) KAIYUAN SECURITIES·2024-11-16 12:32Investment Rating - The investment rating for the company is "Buy" (maintained) [3]. Core Views - The company demonstrated stable performance in Q3 2024, with a focus on upcoming new games such as "Yan Yun Shi Liu Sheng" [2][7]. - The company achieved a revenue of 78.5 billion yuan in the first three quarters of 2024, reflecting a year-on-year increase of 2.91%, while the net profit attributable to shareholders was 20.9 billion yuan, down 8.33% year-on-year [7]. - The Q3 2024 revenue was 26.2 billion yuan, a decrease of 3.89% year-on-year but an increase of 2.84% quarter-on-quarter, with a net profit of 6.5 billion yuan, down 16.57% year-on-year [7]. Financial Performance Summary - For Q3 2024, the revenue breakdown includes: - Game and related value-added services revenue: 20.9 billion yuan (down 4.2% year-on-year) - Youdao revenue: 1.6 billion yuan (up 2.2% year-on-year) - Cloud music revenue: 2.0 billion yuan (up 1.3% year-on-year) - Innovation and other business revenue: 1.8 billion yuan (down 10.3% year-on-year) [7]. - The decline in net profit was primarily due to a foreign exchange loss of 1.056 billion yuan, while revenue and profit showed stable performance quarter-on-quarter [7]. Future Outlook - The company has adjusted its profit forecast for 2024-2026, expecting net profits of 29.3 billion, 34.2 billion, and 39.0 billion yuan respectively, with corresponding EPS of 9.1, 10.7, and 12.1 yuan [7]. - The current stock price corresponds to P/E ratios of 13.7, 11.7, and 10.3 for the years 2024, 2025, and 2026 respectively, indicating potential for growth driven by new game product cycles [7]. - The return of Blizzard games has shown strong performance, with "World of Warcraft" and "Hearthstone" experiencing significant increases in daily active users [8]. - Upcoming new games such as "Marvel Showdown" and "Yan Yun Shi Liu Sheng" are expected to drive further growth in the company's gaming business [8]. Business Segment Performance - Cloud music continues to enhance its ecosystem, achieving a gross margin of 32.8% in Q3 2024, up 0.7 percentage points year-on-year and 5.6 percentage points quarter-on-quarter [9]. - Youdao has turned profitable for the first time in Q3, achieving record operating profit, indicating a positive trend in profitability for both Cloud Music and Youdao [9].