2025-07-22 01:59Summary of NetEase, Inc. Conference Call Company Overview - Company: NetEase, Inc (NTES.O) - Industry: Internet Entertainment - Market Cap: US$87.283 billion - Current Share Price: US$136.12 - Price Target: Raised from US$145.00 to US$151.00, indicating an 11% upside potential [5][21] Key Financial Metrics - 2Q25 Revenue Growth: Expected to be 12% YoY for game revenue and 20% for non-GAAP profit [2][8] - Adjusted Net Profit: Projected to grow 20% YoY to RMB 9.4 billion [8] - EPS Estimates: Slight increases of 1-2% for 2025-2027 [3][20] - Revenue Projections: - 2025: RMB 114,060 million - 2026: RMB 118,798 million - 2027: RMB 123,673 million [5][24] Business Developments - Game Titles Performance: - Marvel Rival S3: Popularity rebound, ranked 2 on Steam in July [7] - Once Human: Strong PC gross ranking post mobile launch, estimated annual revenue contribution of RMB 800 million to 1 billion [7] - New Titles: Five new games scheduled for summer 2025, expected to contribute marginally in 3Q [7] Market Positioning - Competitive Landscape: NetEase is well-positioned amid fund inflows from the food delivery segment, with positive business developments justifying its outperformance [1] - Marketing Strategy: Focus on long-term marketing expense ratio rather than short-term savings [2] Valuation and Risk Assessment - Valuation Method: Sum of the parts (SOTP) with a target P/E of 15x for the games business [30] - Risk Factors: - Shorter-than-expected life cycle of games - Weaker-than-expected margins due to loss-making businesses [41] Investment Thesis - Overweight Rating: Reiterated with a focus on market share gains through development capabilities and global expansion [31] - Margin Improvement: Expected from a favorable revenue mix and better cost control, leading to operating profit margin expansion towards 34% [31] Additional Insights - Revenue Growth Drivers: Anticipated acceleration in game revenue driven by localized content and new titles [32] - Consensus Rating Distribution: 90% Overweight, 10% Equal-weight [34] Conclusion - Outlook: Positive growth trajectory with a focus on game revenue and margin expansion, supported by a strong pipeline of new titles and strategic market positioning [43]