NTES(HK:09999) Huachuang Securities·2024-04-07 16:00Investment Rating - The report maintains a "Recommended" rating for the company, with a target price of 211 HKD based on the current price of 149.80 HKD [6][8]. Core Insights - The company achieved a revenue of 27.14 billion CNY in Q4 2023, representing a year-over-year increase of 7.04% and a quarter-over-quarter decrease of 0.48%. The net profit attributable to shareholders was 6.582 billion CNY, up 66.52% year-over-year [2][14]. - The gaming segment showed robust growth, with revenue from games and related value-added services reaching 20.921 billion CNY, a year-over-year increase of 9.62%. Mobile game revenue was particularly strong, growing by 28.83% year-over-year [3][24]. - The company is expected to continue high growth in gaming revenue in the first half of 2024, driven by the performance of new games such as "Egg Party" and "Nirvana in Fire Mobile" [4][24]. Summary by Sections Q4 Revenue Growth and Margin Improvement - The company reported a total revenue of 271.40 billion CNY in Q4 2023, with significant contributions from gaming and related services, which accounted for 209.21 billion CNY. The overall gross margin for gaming services improved from 59.10% to 69.50% year-over-year [2][14][24]. Gaming Business Performance - The mobile gaming revenue reached 149.87 billion CNY, marking a 28.83% increase year-over-year, while PC gaming revenue declined by 22.66% due to the termination of contracts with Blizzard [3][24]. The deferred revenue stood at 133.62 billion CNY, indicating a release of deferred income [3][24]. Business Outlook and Cost Efficiency - The company is focusing on cost reduction and efficiency improvements across various business segments, with notable increases in gross margins for cloud music and innovation businesses [4][31]. The gross margin for cloud music improved from 14.4% in 2022 to 26.7% in 2023 [4]. Product Pipeline and Future Expectations - The company has a strong product pipeline, with key upcoming titles such as "Nirvana in Fire Mobile" and "Yanyun Sixteen Sounds" expected to drive future growth [5][24]. The strategic focus on product development and market expansion is anticipated to yield positive results in the medium to long term [5]. Financial Projections - The report projects net profits for 2024, 2025, and 2026 to be 30.879 billion CNY, 33.407 billion CNY, and 35.355 billion CNY respectively, with corresponding PE ratios of 14.2, 13.1, and 12.4 [6][11].