Group 1: Financial Performance - In Q2 2025, the company achieved revenue of 27.9 billion yuan, a year-on-year increase of 9% [1] - Non-GAAP net profit reached 9.5 billion yuan, up 22% year-on-year, with a Non-GAAP net profit margin of 34.2%, an increase of 3 percentage points [1] - The comprehensive gross profit margin was 64.7%, up 1.8 percentage points year-on-year, while the total operating expense ratio was 32%, down 3 percentage points year-on-year [1] Group 2: Gaming Business - Online gaming revenue for Q2 2025 was 22.1 billion yuan, a 15% year-on-year increase, with strong performance from titles like "Identity V" and "Marvel Duel" [2] - Deferred revenue reached 16.97 billion yuan, a 25% year-on-year increase, indicating healthy future revenue streams [2] - The company is focusing on global expansion with new game releases and updates, achieving significant rankings on various platforms [2] Group 3: Youdao and Cloud Music - Youdao's net revenue for Q2 2025 was 1.4 billion yuan, a 7% year-on-year increase, driven by a 24% growth in advertising services [2] - Net revenue for NetEase Cloud Music was 2 billion yuan, down 4% year-on-year, with a gross margin of 36.1%, up 4 percentage points year-on-year [3] - The company is expected to increase investment in copyright content in the second half of the year, which may lead to a decrease in gross margin [3] Group 4: Investment Outlook - The company is recognized for its strong game development capabilities and is expected to maintain profitability, with adjusted net profit forecasts of 39.3 billion, 42.5 billion, and 46.7 billion yuan for 2025-2027 [3] - Continued focus on high-quality and globalized game offerings is anticipated, with key titles to watch including "Destiny: Stars," "Forgotten Sea," and "Return to Tang" [3]

Market Overview - A-shares opened high and closed at a ten-year high, with the Shanghai Composite Index rising by 0.85% and trading volume reaching 2.81 trillion yuan, the highest since October 2024[3][16] - The Hang Seng Index fell by 0.37%, while the Hang Seng Technology Index increased by 0.65%[12] - U.S. stocks showed mixed performance, with the Dow Jones down 0.1% and the S&P 500 virtually unchanged, as investors awaited key earnings reports and the Jackson Hole meeting[10] Monetary Policy Insights - The People's Bank of China emphasized a moderately loose monetary policy, with potential for further reserve requirement ratio (RRR) and interest rate cuts if domestic demand does not recover sufficiently[5] - The report highlighted a focus on improving the efficiency of capital allocation and supporting high-quality consumption finance to sustain domestic demand expansion[5] Commodity and Forex Movements - International oil prices rose by approximately 1%, with WTI crude oil closing at $63.42 per barrel, driven by geopolitical developments[27] - The U.S. dollar index increased by 0.3%, while the euro appreciated by 12.6% year-to-date against the dollar[26] Stock Performance Highlights - Notable stock movements included NetEase, which is expected to see stable growth in its gaming segment, with a target price of $143, up from $130.30[8] - Mobileye's stock is projected to rise as it expands its advanced driver-assistance systems (ADAS) business, with a target price of $17.6[8] Sector Performance - In the A-share market, sectors such as information technology and healthcare saw gains of 2.2% and 1.0%, respectively, while real estate and energy sectors faced declines[17] - In Hong Kong, the healthcare and consumer goods sectors both rose by 1.9%, while the energy sector fell by 1.7%[12] Global Economic Indicators - The U.S. 10-year Treasury yield rose to 4.33%, reflecting market expectations ahead of the Federal Reserve's upcoming announcements[30] - The report noted that inflationary pressures and fiscal risks are key concerns for the UK, with the 30-year government bond yield reaching its highest level since 1998[30]

Key Insights - The report highlights the growth potential of the Chinese casual dining sector, with a market size projected to reach approximately 3.9 trillion yuan by 2025, growing at a CAGR of 8.9% from 2023 to 2028 [9] - The company "小菜园" (Little Garden) is identified as a leading player in the casual dining space, with a focus on cost-effectiveness and a successful expansion strategy across China [8][11] - In 2024, Little Garden achieved revenue of 5.21 billion yuan, representing a year-on-year increase of 14.5%, and a net profit of 580 million yuan, up 9.1% [8] - The company plans to continue its expansion, with projections to increase its store count significantly from 667 in 2024 to 1,809 by 2030 [10] Company Overview - Little Garden operates a direct sales model and emphasizes value for money, with an average dining price of 59.2 yuan in 2024 [8] - The company has a strong presence in the East China region, with over 80% of its stores located there, and aims to penetrate deeper into this market while exploring new regions [10] - The report anticipates that the company's net profit will grow to 770 million yuan, 940 million yuan, and 1.12 billion yuan in 2025, 2026, and 2027 respectively, reflecting growth rates of 32%, 22%, and 19% [11] Industry Analysis - The casual dining market is characterized by a fragmented landscape, with the top five companies holding less than 1% market share, indicating significant opportunities for brands that can capture the lower-tier markets and enhance online presence [9] - The report draws parallels with Japan's dining sector, noting that leading companies can thrive even during economic downturns, suggesting a resilient growth trajectory for Little Garden [9] - The report emphasizes the importance of supply chain efficiency and operational improvements as key drivers for profitability in the casual dining sector [10] Investment Recommendations - The report suggests a target stock price range for Little Garden of 13.4 to 14.3 HKD, indicating a potential upside of 32.3% from the current price [11] - The company is rated "outperform" based on its strong market position, effective expansion strategy, and improving operational efficiency [11]

Investment Rating - The investment rating for the company is "Outperform the Market" [6][26]. Core Views - The company reported a 9% year-on-year increase in revenue for Q2 2025, with a Non-GAAP net profit of 9.5 billion yuan, reflecting a 22% year-on-year growth [2][9]. - The online gaming business generated 22.1 billion yuan in revenue for Q2 2025, marking a 15% year-on-year increase, with strong performance from titles like "Identity V" and "Marvel Duel" [3][16]. - The company is focusing on global expansion, with several games performing well in international markets, including "Forgotten Sea" and "Return to Tang" [4][19]. Summary by Sections Financial Performance - In Q2 2025, the company achieved revenue of 27.9 billion yuan, a 9% increase year-on-year, and a Non-GAAP net profit margin of 34.2%, up 3 percentage points from the previous year [2][9]. - The overall gross margin for the company was 64.7%, an increase of 1.8 percentage points year-on-year [4][14]. - The total operating expense ratio was 32%, a decrease of 3 percentage points year-on-year, while the sales expense ratio was 12.8%, showing a year-on-year decline of 1 percentage point [4][14]. Gaming Segment - The gaming segment is expected to perform well in Q3 2025, with multiple successful game launches and updates planned [3][19]. - Deferred revenue reached 16.97 billion yuan in Q2 2025, a 25% year-on-year increase, indicating strong future revenue potential [3][16]. Other Business Segments - Youdao's revenue for Q2 2025 was 1.4 billion yuan, a 7% year-on-year increase, driven by a 24% growth in advertising services [20]. - NetEase Cloud Music reported a revenue of 2 billion yuan in Q2 2025, a 4% year-on-year decline, but with a gross margin improvement of 4 percentage points [4][23]. Profit Forecasts - The company expects adjusted net profits of 39.3 billion yuan, 42.5 billion yuan, and 46.7 billion yuan for the years 2025 to 2027, respectively [4][26]. - The projected revenue for 2025 is 111.976 billion yuan, with a year-on-year growth of 6.3% [5][29].

证券研究报告 | 2025年08月18日 网易-S（09999.HK） 优于大市 销售费率环比回升，公司游戏持续布局全球化 请务必阅读正文之后的免责声明及其项下所有内容 核心观点 公司研究·海外公司财报点评 收入同比上升 9%，销售费率环比有所上升。25Q2 公司收入同比上升 9%， 经调利润率同比提升 3pct。25Q2，公司实现营收 279 亿元，同比上升 9%。Non-GAAP 归母净利润 95 亿元，同比增长 22%；Non-GAAP 归母净利 率 34.2%，同比提升 3pct。25Q2，公司综合毛利率 64.7%，同比上升 1.8pct，网易云音乐毛利率同比提升 4pct。25Q2，公司总经营费率为 32%，同比降低 3pct，环比上升 4pct。其中销售费率 12.8%，同比下降 1pct，环比提升 3pct，回归公司正常销售费率水平，游戏及相关增值服 务市场推广支出增加。 游戏：Q2 为网易游戏淡季，Q3 暑期表现良好。25Q2，在线游戏业务收入为 221 亿元，同比增长 15%。《第五人格》、《燕云十六声》和《漫威争 锋》良好。递延收入表现良好，25Q2 网易递延收入 169.7 亿元，同比 ...

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 237.1 HKD, up from the current price of 200.2 HKD [3]. Core Views - The company reported a net revenue of 27.9 billion RMB for Q2 2025, representing a year-over-year increase of 9.4%, although slightly below the Bloomberg consensus estimate of 28.4 billion RMB [1]. - The gaming segment continues to show strong growth, with net revenue of 22.8 billion RMB, a year-over-year increase of 13.7%, but also below market expectations [1]. - Deferred revenue at the end of the period reached 17 billion RMB, up 24.6% year-over-year, indicating strong future revenue support [1]. - The company has adjusted its profit forecasts for 2025 and 2026, increasing them by 9.9% and 8.2% respectively, and introduced a new profit forecast for 2027 [1]. Summary by Sections Financial Performance - Q2 2025 operating profit was 9.06 billion RMB, with an operating margin of 32.5%, slightly below the expected 9.35 billion RMB [1]. - Adjusted net profit for Q2 2025 was 9.5 billion RMB, a year-over-year increase of 21.9%, also slightly below the expected 9.6 billion RMB [1]. - The company's gross margin improved to 64.7%, up 1.8 percentage points year-over-year, exceeding expectations [1]. Business Segments - The gaming segment's online game revenue was 22.1 billion RMB, with a year-over-year growth of 14.9%, driven by new releases [1]. - Youdao's net revenue was 1.4 billion RMB, a year-over-year increase of 7.3%, surpassing expectations [1]. - Cloud music revenue reached 2 billion RMB, also up 7.3% year-over-year, exceeding expectations [1]. - Innovative and other businesses saw a decline in revenue, down 17.8% year-over-year [1]. Profitability and Cost Management - Marketing expenses were 3.6 billion RMB, with a marketing expense ratio of 12.8%, indicating a recovery to historical levels [1]. - The company continues to optimize its management and R&D expenses, with management expense ratio at 3.8% and R&D expense ratio at 15.6% [1]. Valuation and Future Outlook - The report projects a 2025-2026 adjusted net profit of 39.02 billion RMB and 41.43 billion RMB respectively, with a new forecast for 2027 at 44.48 billion RMB [2]. - The company is expected to benefit from the high growth potential in the domestic gaming industry and improvements in profitability for its cloud music segment [1].

Core Viewpoint - The company's 2Q25 performance met expectations but slightly fell short of market forecasts, with revenue growth of 9% year-on-year to 27.9 billion yuan and Non-GAAP net profit increasing by 22% to 9.5 billion yuan [1][2] Revenue and Growth - 2Q25 revenue reached 27.9 billion yuan, aligning with the company's expectations (27.6 billion yuan) but below Bloomberg's consensus (28.4 billion yuan) [1] - Online gaming revenue grew by 15% year-on-year, driven by titles such as "Identity V," "Yanyun," and "Marvel Showdown," along with some licensed games [1] - The flagship product "Fantasy Westward Journey" mobile game achieved a new quarterly revenue high in 2Q25 [1] Cost and Profitability - Gross margin for 2Q25 was 65%, showing slight improvements from 1Q25 (64%) and 2Q24 (63%), primarily due to increased margins in gaming and VAS businesses [2] - Sales expense ratio in 2Q25 recovered to 13%, up from 9% in 1Q25, indicating a faster recovery than market expectations [2] Future Outlook - The company plans to launch key new mobile games, including "Destiny: Stars" on August 28, with a strong pipeline of diverse products for the coming years [2] - The flagship products continue to perform well, with "Identity V" and "Fantasy Westward Journey" maintaining strong positions in the iOS sales charts [2] Valuation and Forecast - The company maintains its profit forecast, with current stock prices reflecting a valuation of 16x for Hong Kong and 15x for US stocks for 25/26 years Non-GAAP EPS [3] - The target price is set at 263 HKD and 169 USD, indicating an upside potential of 27% for Hong Kong stocks and 25% for US stocks [3]

Group 1 - The core viewpoint is that NetEase's Q2 game revenue increased by 13.7% year-on-year, demonstrating the effectiveness of its dual strategy of self-developed and licensed games [2][3] - The net income from NetEase's online games and related value-added services for Q2 was RMB 22.8 billion (approximately USD 3.2 billion), compared to RMB 20.1 billion in the same period last year [1] - The revenue from online games accounted for approximately 97.1% of the segment's net income, indicating stability in the core business [1][2] Group 2 - New game releases such as "Identity V," "Yanyun Sixteen Sounds," and "Marvel Duel" contributed to the increase in net income, enhancing the competitiveness of the product line [2] - The capital market may assign a higher valuation to NetEase due to its ability to continuously launch high-quality content, which could boost industry confidence [2] - The gaming sector is experiencing multiple catalysts for transformation, including AI, content, and commercialization model changes, with the gaming ETF (159869) reflecting the overall performance of A-share listed companies in the animation and gaming industry [2]

Financial Performance - Net revenue for the second quarter of 2025 was 27.9 billion yuan, representing a year-on-year increase of 9.4% [1] - Net profit attributable to shareholders was 8.6 billion yuan, down from 10.3 billion yuan in the previous quarter and up from 6.8 billion yuan in the same period last year [1] - Non-GAAP net profit attributable to shareholders was 9.5 billion yuan, compared to 11.2 billion yuan in the previous quarter and 7.8 billion yuan in the same period last year [1] Game Performance and Strategy - The game "Yan Yun Shi Liu Sheng" has shown stable performance, exceeding pre-launch expectations in terms of active users and commercialization [2] - "Seven Days World" experienced a revenue rebound due to a successful 2.0 version update and the introduction of a new PVP mode, ranking fourth on the Steam global sales chart [3] - The user and revenue distribution between China and overseas markets for "Seven Days World" is 1:1 and 1:1.5, respectively [3] Blizzard Games and Market Potential - Blizzard games have performed well, with data surpassing levels from before the last shutdown, indicating strong potential for attracting both new and returning players in China [4] - The company aims to create content that aligns with Chinese players' preferences to tap into the significant potential of Blizzard games [4] Shooting Game Market - The shooting game segment is highly competitive, with high user expectations for art quality and innovative gameplay [4] - The company plans to continue investing in shooting games to establish leading products in this space [4] Long-term Game Development - "Marvel Showdown" has seen revenue and daily active users stabilize after the launch of its third season, indicating effective new strategies [5] - "Forgotten Sea" is viewed as a potential top game, with a focus on its commercial model and target market [5] Evergreen Games Recovery - "Dream Journey" has shown recovery in performance, with a peak of 2.93 million concurrent users recorded [6] - "Egg Party" is expected to become a popular family game through continued investment in high-quality content and marketing [7] AI Integration and Overseas Expansion - The company is actively investing in AI to enhance game development and operations, with plans for AI-driven games in the near future [8] - The overseas market is seen as attractive, with successful titles like "Marvel Showdown" and "Seven Days World" achieving good results [9]

Financial Performance - Net revenue for Q2 2025 reached 27.9 billion yuan, representing a year-on-year growth of 9.4% [1] - Net profit attributable to shareholders under non-GAAP was 9.5 billion yuan, showing a year-on-year increase of 21.8% [1] Gaming Segment - The gaming sector remains the core business for the company, with net revenue from games and related value-added services amounting to 22.8 billion yuan in Q2 [1] - The game "Yan Yun Shi Liu Sheng" has seen sustained popularity, with over 40 million cumulative users by the end of July [1] - The classic IP "Dream of the Red Chamber" achieved a new high in simultaneous online users, while mobile game revenue also reached a new record [1] Other Business Segments - NetEase Youdao reported Q2 net revenue of 1.4 billion yuan, achieving sustainable profitability for the fourth consecutive quarter under its "AI-native" strategy [1] - NetEase Cloud Music's Q2 net revenue was 2 billion yuan, remaining stable year-on-year [1] - Net revenue from NetEase Yanxuan increased quarter-on-quarter, contributing 1.7 billion yuan in Q2 [1] North American Market Expansion - Several new games from NetEase have successfully penetrated the North American market, with "Out of Bounds" ranking second on the PlayStation May free download chart in North America [2] - "All-Star Streetball Party" and "Marvel's Secret War" topped the iOS download charts in multiple regions after their overseas releases, both entering the top 2 in the US download rankings [2] - "Seven Days World" 2.0 version reached fourth place on the Steam global bestseller list, while "Marvel Showdown" secured first and second places on the Steam US and global bestseller lists, respectively [2]