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NetEase：网易（NTES）：Strong 1Q25 results on solid games business and disciplined opex control-20250516
NTESNTES(NTES) 招银证券·2025-05-16 04:58

Investment Rating - The report maintains a "BUY" rating for NetEase, indicating a potential return of over 15% over the next 12 months [19]. Core Insights - NetEase reported strong 1Q25 results with total revenue growing by 7% YoY to RMB28.8 billion, aligning with consensus estimates. Operating profit surged by 37% YoY to RMB10.4 billion, exceeding consensus by 25%, primarily due to disciplined operating expense control, which decreased by 14% YoY [1][2]. - The games business showed a reacceleration in revenue growth, increasing by 12% YoY in 1Q25, supported by a 19% YoY growth in contract liabilities, which is expected to bolster future revenue [1][7]. - The target price for NetEase has been raised to US136.5fromthepreviousUS136.5 from the previous US125.5, reflecting a 27.4% upside from the current price of US107.11[3][11].FinancialPerformanceSummary−∗∗RevenueForecasts∗∗:TherevenueforFY25isestimatedatRMB113.1billion,withprojectionsforFY26andFY27atRMB121.1billionandRMB128.9billion,respectively[2][8].−∗∗ProfitabilityMetrics∗∗:AdjustednetprofitisexpectedtoreachRMB40.1billioninFY25,withagrowthtrajectorycontinuingintoFY26andFY27[2][8].−∗∗ValuationMetrics∗∗:NetEaseiscurrentlytradingataP/Eratioof13.6xforFY25,whichisinlinewithitstwo−yearhistoricalaverage[7][11].BusinessSegmentAnalysis−∗∗OnlineGames∗∗:TheonlinegamessegmentisvaluedatUS107.11 [3][11]. Financial Performance Summary - **Revenue Forecasts**: The revenue for FY25 is estimated at RMB113.1 billion, with projections for FY26 and FY27 at RMB121.1 billion and RMB128.9 billion, respectively [2][8]. - **Profitability Metrics**: Adjusted net profit is expected to reach RMB40.1 billion in FY25, with a growth trajectory continuing into FY26 and FY27 [2][8]. - **Valuation Metrics**: NetEase is currently trading at a P/E ratio of 13.6x for FY25, which is in line with its two-year historical average [7][11]. Business Segment Analysis - **Online Games**: The online games segment is valued at US121.8 billion, accounting for 89.2% of the total valuation, based on a multiple of 16x 2025E EV/EBIT, consistent with industry averages [11][12]. - Youdao and Cloud Music: Youdao is valued at US0.7billion,whiletheCloudMusicbusinessisvaluedatUS0.7 billion, while the Cloud Music business is valued at US3.8 billion, both based on industry-standard multiples [11][12]. - Innovative Businesses: The innovative businesses segment is valued at US1.6billion,reflectingagrowingdiversificationstrategy[11][12].MarketPositionandGrowthDrivers−Thegamesbusinessisexpectedtobenefitfromseveralhighlyanticipatedgloballaunches,includingtitleslikeMARVELMysticMayhemandDestiny:Rising,whichshouldfurtherenhancerevenuegrowth[7].−Non−gamingsegmentsarealsoimprovingefficiency,withanotableincreaseingrossprofitmarginfortheCloudMusicsegmentdespiteadeclineinrevenue[7][8].SharePerformance−ThemarketcapitalizationofNetEasestandsatapproximatelyUS1.6 billion, reflecting a growing diversification strategy [11][12]. Market Position and Growth Drivers - The games business is expected to benefit from several highly anticipated global launches, including titles like MARVEL Mystic Mayhem and Destiny: Rising, which should further enhance revenue growth [7]. - Non-gaming segments are also improving efficiency, with a notable increase in gross profit margin for the Cloud Music segment despite a decline in revenue [7][8]. Share Performance - The market capitalization of NetEase stands at approximately US67.99 billion, with a 52-week high of US109.80andalowofUS109.80 and a low of US76.28 [3][4]. - Over the past month, the stock has seen an absolute increase of 9.3% [4].