The company's recent situation
The company's key new game “Eternity Mobile Game” was announced to be scheduled for July 25, and also officially announced multiple types of joint activities and hands-on communication activities. In addition, various new products will be launched in 3Q24, including “16 Sounds of Yan Yun” (July 26 on PC) and “Seven Day World” (July 10 on PC). We suggest the impact of the launch of new products and a steady and slight increase in basic markets on the company's incremental profit fulfillment.
reviews
The new game “Eternity Mobile Game” is scheduled to gain momentum during the year, and there are plenty of collaborative and hands-on activities.
“Eternity Mobile Game” announced at the “Everlasting 3rd Anniversary Press Conference” that it will open beta on July 25. Previously, two rounds of testing began on April 1 and June 19, respectively. The team said: In terms of content, the beta version will introduce more new heroes/weapons/gameplay to present higher image quality. Linkage aspects: 1) The “Easy Family” campaign will be launched to link in both directions with various NetEase games such as “Egg Party”; 2) It will link Gaode Maps (launching a navigation voice zone) /Happy Valley/Are You Hungry? /Taobao 88VIP/Ctrip/Municipal Card, etc. In terms of terminal communication, activities such as appearance, active tasks, and first charge communication will be launched. We believe that “Endless Mobile Game” is expected to acquire a larger number of users on mobile devices, and that the cold weapon combat gameplay also differentiates itself from similar competitors, and is expected to achieve breakthroughs in racetrack innovation; in addition, communication with mobile games will also better drive the overall IP ecosystem and further stimulate traffic flow.
The basic stock is stable, and the PC adjustments of “Dream Journey to the West” are controllable. Regarding adjustments related to the PC version of “Dream West Journey” and Treasure Court, we believe: 1) The core is to optimize the compatibility of current game user habits, product internal ecology, etc., with the aim of improving the health of the game ecosystem and ensuring the stability of the user base. 2) The recent depreciation of virtual currency was a temporary effect, mainly due to a decrease in short-term transaction demand and stable money supply after some functions of the treasure house were adjusted. The value of virtual currency naturally declined due to changes in supply and demand, but the overall value of virtual currency fell within a manageable range. We expect the PC version of “Journey to the West” to have a relatively stable month-on-month revenue contribution in subsequent quarters. However, for other mobile games involving Treasure House transactions, considering the scale and category of transactions themselves (mainly account transactions), we believe that the impact of this adjustment on turnover is relatively limited.
The reserve products are diverse and rich, and many games are in the testing stage. For this summer, the company also has “16 Voices of Yanyun” (July 26 on PC), “Seven Day World” (July 10 on PC), etc. The quality of early testing was good, and feedback from game users was positive. World of Warcraft will also restart all services on July 11th. In addition, “Daredevil” (3 matches), “Broken Land”, and “Marvel Clash” (to be released on PS5 in July) are also in the testing phase or will begin a new round of testing.
Profit forecasting and valuation
Maintain profit forecasts. The current stock price corresponds to 12.5/11.2 times Hong Kong stocks and 13/11 times the 24/25 non-GAAP P/E for US stocks. Maintaining an outperforming industry rating and target price of HK$206/$133 (SOTP valuation method, HK/US stocks 18/16 times 24/25 non-GAAP P/E), with an upward margin of 45%/43%.
risks
The macroeconomy is sluggish, regulatory policies are becoming stricter, the game launch process or performance falls short of expectations, cost and cost investment exceeds expectations, overseas competition intensifies, and there is a risk of exchange rate changes.