NTES(09999) 东方证券·2024-11-19 07:05Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 149.00 / CNY 134.69 [4][3] Core Insights - The company reported Q3 revenue of CNY 26.2 billion, a year-over-year decrease of 3.9% but a quarter-over-quarter increase of 2.8%, primarily driven by increased mobile game net revenue [2] - Q3 gross margin was 62.9%, reflecting a year-over-year increase of 0.7 percentage points, mainly due to the growth in gross margin from cloud music [2] - The company anticipates a recovery in game revenue in Q4, driven by the return of Blizzard games, with expected revenue of CNY 21.7 billion, representing a year-over-year increase of 4% and a quarter-over-quarter increase of 4% [2][3] Financial Summary - Q3 net profit attributable to shareholders was CNY 6.54 billion, down 16.6% year-over-year and 3.3% quarter-over-quarter [2] - The company expects net profit for 2024 to be CNY 28.7 billion, with projections of CNY 32.5 billion and CNY 34.9 billion for 2025 and 2026, respectively [3] - The report highlights a total revenue forecast of CNY 106.3 billion for 2024, with a year-over-year growth of 2.77% [3] Revenue Breakdown - Total revenue from games and related value-added services in Q3 was CNY 20.86 billion, a year-over-year decrease of 4.2% but a quarter-over-quarter increase of 4.0% [2] - Mobile game revenue was CNY 14.3 billion, down 9.7% year-over-year and 2.9% quarter-over-quarter, while PC game revenue increased significantly by 29.0% year-over-year and 30.0% quarter-over-quarter to CNY 5.9 billion [2] - Cloud music revenue in Q3 was CNY 2.0 billion, reflecting a year-over-year increase of 1.3% [2] Future Growth Drivers - Upcoming mobile games such as "Seven Days World" and "Yanyun Sixteen Sounds" are expected to drive future growth [3] - The return of Blizzard's "Hearthstone" is anticipated to significantly boost mobile game revenue, with expected daily active users (DAU) increasing by 150% compared to before the game's closure [2]