NTES(HK:09999) KAIYUAN SECURITIES·2024-03-03 16:00Investment Rating - The investment rating for the company is "Buy" (maintained) [2][6] Core Views - The company's performance has significantly increased due to blockbuster new products, and future releases are expected to continue driving growth [2][6] - In 2023, the company achieved operating revenue of 1,035 billion CNY (up 7.23% year-on-year) and a net profit attributable to shareholders of 294 billion CNY (up 44.64% year-on-year) [6] - The gross margin improved to 60.95% (up 6.27 percentage points year-on-year), primarily due to an increase in revenue from self-developed games and improved gross margin from cloud music [6] - The net profit margin reached 28.43% (up 7.35 percentage points year-on-year), attributed to the rise in gross margin and effective cost control [6] - The company has a strong pipeline of games, including "射雕" (scheduled for public testing on March 28) and "永劫无间" (mobile version approved in February), which are expected to further drive revenue growth [7][8] Financial Summary - In Q4 2023, the company reported operating revenue of 271 billion CNY (up 7.04% year-on-year, down 0.48% quarter-on-quarter) and a net profit of 66 billion CNY (up 66.52% year-on-year, down 16.01% quarter-on-quarter) [6] - The company forecasts net profits for 2024, 2025, and 2026 to be 331 billion CNY, 364 billion CNY, and 394 billion CNY respectively, with corresponding EPS of 10.3 CNY, 11.3 CNY, and 12.2 CNY [6][9] - The current stock price corresponds to P/E ratios of 15.5, 14.1, and 13.0 for 2024, 2025, and 2026 respectively [6][9] Growth Drivers - The company is leveraging AI technology in gaming, enhancing user experience and content richness, which is expected to open up further growth opportunities [8] - The game "蛋仔派对" has reached 500 million registered users since its launch in 2022, with daily active users exceeding 40 million during the 2024 Spring Festival [7]