NetEase (NTES US)_Buy_ New launches continue to shine

Summary of NetEase (NTES US) Conference Call Company Overview - Company: NetEase (NTES US) - Industry: Internet Software & Services - Market Cap: USD 65.229 billion [15] Key Points Performance and Growth - Marvel Rivals (MR): - Achieved a new high of STEAM users in January, ranking 3 and 4 on PS5 and Xbox respectively [2] - Weekly revenue ranking peaked at 2 on STEAM in January [2] - Grossed approximately RMB 2 billion between December 2024 and January 2025, leading to an increase in gross billings forecast to RMB 6 billion for 2025 (up from RMB 3.3 billion) [2] - Where Winds Meet (WWM): - Total users reached 15 million within a month of launch, with monetization exceeding expectations [2] - Gross billings forecast raised to RMB 5.6 billion for 2025 (up from RMB 3 billion) [2] - Overall Revenue Growth: - Expected game revenue growth of 12% in 2025, with PC revenue projected to increase by 51% year-over-year [2] - Adjusted net profit expected to grow by 12% year-over-year [4] New Game Launches - Fragpunk (PC): - Expected to contribute RMB 1.7 billion to gross billings in 2025, featuring unique card mechanics and a 1v1 duel mechanism [3] - Destiny Rising (Mobile): - Anticipated to generate RMB 1.4 billion in gross billings in 2025, although players expressed concerns over heavy monetization [3] Financial Estimates - Earnings Estimates: - 2025 earnings estimates raised by 1% [2] - New target price set at USD 117 (previously USD 115), implying approximately 16% upside from current levels [2][6] - Financial Ratios: - PE ratio projected to be 13x for 2025, compared to Tencent's 14x [2] - Expected dividend yield of 2.0% in 2025 [7] Market Position and Investor Sentiment - Stock Performance: - NetEase shares have increased by 33% since November 2024, outperforming KWEB which rose by 5% in the same period [2] - Investor Benchmarking: - Investors are using Tencent's PE as a benchmark for NetEase's potential re-rating [2] Risks and Challenges - Market Risks: - Potential difficulties in obtaining game monetization approvals [65] - Risks associated with new game launches not meeting expectations and competition from Tencent and Mihoyo [65] Future Outlook - International Expansion: - Expectation that overseas games will contribute 14% of total gross billings in 2025, up from 6% in 2024 [2] Additional Insights - Deferred Revenue: Expected to grow by 16% year-over-year, indicating strong future revenue potential [4] - User Engagement: MR has the largest game community on Discord and was the 7th most-watched game on Twitch in December 2024, highlighting strong user engagement [29][27] This summary encapsulates the key insights from the conference call regarding NetEase's performance, growth prospects, financial estimates, and market positioning.