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网易-S(09999.HK):游戏业务超预期 关注年底新游上线情况

NetEase S (09999.HK): The game business exceeded expectations and paid attention to new game launches at the end of the year

huaan ·  Nov 17

3Q24 performance:

In 24Q3, the company achieved revenue of 26.21 billion yuan (yoy -3.9%, QoQ +2.8%). By business, gaming and related value-added services exceeded expectations (20.9 billion vs. 20.7 billionconsensus), -4.2% YoY; Youdao business fell short of expectations (1.57 billion vs 1.69 billionconsensus), +2.2% YoY; Cloud Music fell short of expectations (2 billion vs 2.05 billionconsensus), +1.3% YoY; innovation and other businesses fell short of expectations ( 1.77 billion vs 2.07 billionconsensus), -10.3% YoY.

The company achieved gross profit of 16.48 billion yuan (yoy -2.9%) in the third quarter, with a gross margin of 62.9%, an increase of 0.7 pct; adjusted net profit of 7.5 billion yuan (yoy -13.3%), and a net profit margin of 28.6%, a year-on-year decrease of 3.1 pct.

Long-term games continue to gain strength, and Blizzard's return provides increments

The popularity of the company's long-term operation of games has not abated, and the “Fifth Personality” and “Eternity” mobile games continue to provide increased sales volume. Since its launch in July, the new mobile game “Eternity” has reached the fourth highest on the iOS bestseller list, and subsequent traffic has dropped rapidly. Overseas, “Peak Speed” hit the Japanese market in August and topped the free lists on the Apple and Google App stores.

NetEase and Blizzard have re-collaborated, and the key games “World of Warcraft” and “Hearthstone” have returned. Among them, “World of Warcraft” DAU increased by more than 50% compared to before the suspension, and “Hearthstone” DAU increased sharply by 150% compared to before it was discontinued. The two games are expected to bring stable revenue to the company in the long term.

Key new tours will be launched at the end of the year, and the content reserve is rich

It is expected that two new games, “Marvel Clash” and “The Sixteen Voices of Yan Yun”, authorized by Marvel IP, will be launched in December, which is expected to drive traffic growth.

The company's reserve games include a variety of products under development, such as “Destiny: Rising” and “Marvel's Arcane Frenzy”. The two-dimensional game “Code Name: Infinity” will begin its first test, and various new products will continue to enrich the product matrix.

Investment advice

We expect the net profit (non-GAAP) for CY 24/25/26 to be 318.2/34.94/38.32 billion yuan, respectively, and the previous forecast value for CY 24/25/26 was 380.3/441.9/ 48.88 billion yuan, respectively. Maintain a “buy” rating.

Risk warning

Fluctuations in the number of game versions; uncertainty about players' spending intentions and revenue expectations.

The translation is provided by third-party software.


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