BOCI Research report pointed out that NetEase (09999.HK) is expected to disclose its third-quarter performance in mid to late November. The bank expects the company's third-quarter performance to be relatively disappointing, with total revenue and core gaming revenue expected to decline by 5% year-on-year, mainly due to a 7% year-on-year decline in mobile gaming revenue, all numbers are 4% lower than market expectations. The bank expects the company's gross margin and adjusted net profit margin to be 62.6% and 30.3% respectively, both in line with market expectations.
The bank noted that NetEase has accelerated strategic proactive adjustments in game research and development, operations, and investment at home and abroad in recent months to cope with challenging macro-environment and intense market competition. However, the bank believes that the company's ambition to develop and operate international self-developed IP content remains unchanged.
The bank maintains a 'buy' rating on NetEase but lowers the target price to 151 yuan, mainly due to relatively weak expectations for the mobile game market in the second half of this year.