网易-S：新游表现亮眼，或迎来底部反转

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of HKD 163, indicating a potential upside of 20.2% from the current price of HKD 137.5 [1][5][11] Core Insights - The company's third-quarter performance has reached a bottom, and the launch of new games is expected to reverse the trend. Revenue for Q3 2024 was CNY 26.21 billion, a decline of 3.9% year-over-year, with net profit attributable to shareholders at CNY 6.5 billion, down 16.7% from the previous year [3][8] - The gaming segment showed resilience, with game revenue at CNY 20.2 billion, a quarter-over-quarter increase of 5%, and a year-over-year increase of 29% for PC games [3][8] - The company has a rich pipeline of new games, including "Yanyun Sixteen Sounds," which achieved 3 million downloads within five days of its PC launch, and several other titles expected to launch in 2025 [4][9] Financial Projections - Revenue projections for 2024-2026 are CNY 105.9 billion, CNY 112.4 billion, and CNY 119.4 billion, with year-over-year growth rates of 2.41%, 6.10%, and 6.20% respectively. Net profits are expected to be CNY 26.7 billion, CNY 30.7 billion, and CNY 36.3 billion for the same period [5][11] - The report employs a segmented valuation approach, assigning a PE ratio of 15x for the gaming business and 5x PS for other segments, leading to a target PE of 16x for 2025 [5][11] Business Segment Performance - NetEase Youdao reported revenue of CNY 1.6 billion in Q3 2024, a year-over-year increase of 2.2%, marking its first profitable third quarter [3][10] - NetEase Cloud Music generated revenue of CNY 2 billion, up 1.3% year-over-year, with a significant increase in subscription revenue contributing to overall growth [10]