Jinwu Financial News | According to Huachuang Securities Research, NetEase (09999) achieved revenue of 25.486 billion yuan (yoy +6.14%, qoq -5.08%) in 24Q2, of which revenue from games and related value-added services was 20.056 billion yuan (yoy +6.69%, qoq -6.54%). The company achieved net profit of 6.759 billion yuan (yoy -18.00%). Non-Ifrs net profit to mother was 7.819 billion yuan (yoy -13.29%, qoq 8.12%). The overall stock of games remained resilient, and some new games weakened slightly month-on-month; exchange gains and losses dragged down current profit performance. The bank believes that the overall month-on-month decline was due to declines in the new mobile games “Against the Cold” and “Egg Boy Party”, but overall growth was maintained year-on-year. The Q3 mobile game side is expected to enter a high base period, but mobile games are expected to benefit from Blizzard's return to drive month-on-month performance.
According to the bank, the company's Youdao business achieved revenue of 1.322 billion yuan (yoy +9.5%) in 2024Q2, achieving net profit of 0.099 billion yuan, a year-on-year narrowing of 66.75%; Cloud Music 2024Q2 achieved revenue of 2.041 billion yuan (yoy +4.74%), and H1 achieved profit of 0.81 billion yuan (yoy +175.69%), and the profit situation continued to improve; innovative business and other revenue achieved revenue of 2.067 billion yuan ( yoy +0.48%), overall stability.
The bank continued that in terms of products, the company has a number of new products in stock. The second new product, “Eternity Mobile Game”, has already been launched, and is currently ranked third in the iOS bestseller list; follow-up attention is being paid to whether a stable DAU user market can be formed in the long term. In the medium term, products considered worthy of attention include projects such as “16 Voices of Yan Yun”, “Marvel Strike”, and “FragPunk”. Follow up on product line performance.
The bank said it predicts that the company's net profit from 2024 to 2026 will be 29.8 billion yuan/33.3 billion yuan/35.9 billion yuan (previously 30.9 billion yuan/33.4 billion yuan/35.3 billion yuan). The current stock price corresponding to 2024 to 2026 PE is 11.8/10.5/9.8X, respectively, and the net profit due to non-Gaap is about 33.5 billion yuan/36.8 billion yuan/39.4 billion yuan, respectively. Valuation using the SOTP method: based on the company's historical valuation and the current slowdown in industry growth, the game business was given 15 times PE. According to the current US stock market value, the leading business is owned by NetEase 0.8 billion yuan; according to the current market value, Cloud Music belongs to NetEase 11 billion yuan, and other businesses are given 2XPS. After aggregation, it corresponds to the 2024 target price of HK$156, maintaining the “Recommended” rating.