Guoxin Securities·2025-05-22 07:45Investment Rating - The investment rating for the company is "Outperform the Market" [4][26]. Core Views - The company's revenue increased by 7% year-on-year, with a notable profit performance primarily influenced by sales expenses. In Q1 2025, the company achieved a revenue of 28.8 billion yuan, a 7% increase year-on-year. The Non-GAAP net profit attributable to the parent company was 11.2 billion yuan, representing a 32% year-on-year growth, with a Non-GAAP net profit margin of 39%, up by 7 percentage points year-on-year [10][4]. - The online gaming business showed strong growth, with revenue reaching 23.4 billion yuan in Q1 2025, a 15% increase year-on-year. PC game revenue surged by 85% to 8.1 billion yuan, driven by the return of popular titles and new game releases [2][19]. - The company has adjusted its profit expectations upward, forecasting adjusted net profits of 39.3 billion, 42.5 billion, and 46.7 billion yuan for 2025-2027, reflecting increases of 5%, 2%, and 2% respectively [4][26]. Summary by Sections Financial Performance - In Q1 2025, the company reported a comprehensive gross margin of 64.1%, an increase of 0.7 percentage points year-on-year. The gross margin for games and value-added services was 68.8%, down by 0.7 percentage points due to changes in game product structure. The total operating expense ratio was 28%, a decrease of 7 percentage points year-on-year, with the sales expense ratio at 9.4%, down by 4.6 percentage points [10][11]. Game Business - The mobile game revenue was 15.4 billion yuan, down 4% year-on-year due to a high base from the previous year. However, the PC game revenue of 8.1 billion yuan saw an impressive 85% increase, attributed to the successful return of titles like "Overwatch" and the performance of new games [2][19]. - Several new games have performed exceptionally well, enhancing the company's global gaming influence. Titles like "Marvel's Contest of Champions" and "Outsiders" have quickly climbed to the top of sales charts [19][2]. Other Business Segments - The company's education segment, Youdao, reported a net revenue of 1.3 billion yuan, a 7% year-on-year decline, but the decline rate has narrowed compared to the previous quarter. Key products in AI educational services and programming learning have shown significant growth [20]. - NetEase Cloud Music reported a net revenue of 1.9 billion yuan, down 8% year-on-year, with a gross margin of 36.8%. The decline was primarily due to a one-time copyright adjustment in the previous year [23].