Blizzard and NetEase have reached a partnership, and Blizzard's games will return in the summer of 2024 to maintain a “buy” rating
On April 10, Blizzard and NetEase reached a new partnership. Blizzard's games will return to the mainland China market one after another starting in the summer of 2024 in accordance with the updated game distribution agreement. Additionally, Microsoft Games and NetEase have reached an agreement to try to bring new NetEase games to Xbox and other platforms. We believe that the renewed cooperation between Blizzard and NetEase will, on the one hand, be expected to bring revenue and performance growth as the game is launched. On the other hand, the company is expected to cooperate more with Blizzard and Microsoft to launch more cooperative products, which will also help enhance the NetEase brand value and help the global layout. Based on cooperation with Blizzard and expectations for the company's game flow, we raised our profit forecast for 2024-2026. We expect the company's net profit for 2024-2026 to be 339/373/4 billion yuan (previous value was 331/364/39.4 billion yuan), corresponding EPS was 10.5/11.6/12.5 yuan, and PE corresponding to the current stock price is 14.0/12.7/11.7 times, respectively. We are optimistic that the launch of high-quality reserve games will continue to drive the company's performance growth and maintain the “buy” rating.
There are plenty of high-quality reserve products, which are expected to support the continued growth of the company's performance, and the company's reserve products are rich. The products that have already received editions include “Eternity,” “16 Sounds of Yanyun,” “Firefly Attack,” “Seven Day World,” and “Mission Zero,” all of which are expected to be launched at an accelerated pace. Among them, “Eternity Mobile Game” was first tested on April 1, and the “Eternity” mobile game was in public beta in 2021 and won two Steam Platinum Awards. After switching to a free-to-play game in July 2023, the number of “Eternity” mobile game players worldwide only doubled to over 40 million in 3 months. Up to now, the number of “Everlasting Mobile Game” official website reservations are close to 20 million. It is expected that the game will continue its impressive performance after launch. In addition, the company also has a number of blockbuster games under development, including “Code Name: Infinity”, “Code Name: 56,” and “Temporarily Call It: Tianzi 67”. The rich high-quality product pipeline is expected to support the company's continued growth in performance.
Continue to strengthen the global market and 3A game layout, or further open up room for game business growth. A number of products have already been launched overseas in 2023, including “Egg Party” launched in the Southeast Asian, Hong Kong, Macao and Taiwan markets, and “Project: Blood Strike” launched in the Southeast Asian market. It is expected that more products will be launched in more regions in the future.
Furthermore, since 2019, the company has set up 14 studios in the open sea, mainly for 3A console game development. As R&D is completed, it may go online, or further help expand overseas markets and is expected to achieve breakthroughs in the console market.
Risk warning: Risks such as the launch time or streaming performance of new games falling short of expectations, and declining streaming of old games.