HTSC·2025-08-15 06:38Investment Rating - The report maintains a "Buy" rating for NetEase (NTES US) with a target price of $153.19, reflecting a 17.9x PE for the year 2025 [7][27]. Core Insights - NetEase's total revenue for Q2 2025 increased by 9% year-on-year to 27.9 billion RMB, slightly below consensus expectations by 1% [1][2]. - Adjusted net profit attributable to shareholders grew by 22% year-on-year to 9.53 billion RMB, aligning with consensus expectations [1][2]. - The gaming segment's revenue showed a 15% year-on-year increase to 22.1 billion RMB, although it was slightly below expectations [2][3]. - The company has a robust pipeline of new games, including "Destiny: Stars" and "Diablo II" remastered, which are expected to drive future growth [1][4][13]. Revenue and Profitability - Q2 gaming and value-added services revenue rose by 14% year-on-year to 22.8 billion RMB, with gaming revenue specifically increasing by 15% [2][3]. - Deferred revenue for Q2 exceeded expectations, decreasing by 4% quarter-on-quarter to 17 billion RMB [2]. - The gross margin for gaming and value-added services improved by 1.4 percentage points to 70.2% [2][12]. Game Development and Market Position - The company launched nine new games in May 2025, with significant titles in the pipeline, including "Destiny: Stars" and "Diablo II" remastered [3][4][13]. - The online peak for "Fantasy Westward Journey" reached 2.93 million users, marking a historical high [3]. - The mobile gaming segment is expected to see a recovery due to a low base in the second half of the year, with anticipated growth driven by summer activities and new releases [4][23]. Financial Forecasts - Revenue forecasts for 2025-2027 have been slightly adjusted downwards, with total revenue expected to be 115.5 billion RMB in 2025, reflecting a 0.9% decrease [6][23]. - Adjusted net profit forecasts for 2025-2027 have been revised to 38.9 billion RMB, 43 billion RMB, and 48 billion RMB respectively [6][23]. - The adjusted operating profit margin is projected to be 35.8% for Q2 2025, indicating a healthy profitability outlook [24].