NetEase -S (09999.HK): Anti-cold mobile games will contribute to the results of the second half of the year

方正證券 ·  03/04  · Researches


On March 3, NetEase, Inc officially announced that it will officially launch a platform-wide public test on June 30 to launch a season-made, open world and role-playing game.


1, "against the cold" mobile games online will bring the company's performance increment in the second half of the year.

1.1 "upside down" mobile games are highly expected, and a number of subversive attempts are expected to reshape MMO mobile games:

1) the official said that mobile games will not sell numerical values at all, and the game mode will be remade to the season system in which there is no need to buy cards, and changes will be made in the game screen, game mechanism, game content and other directions, so as to integrate the sophisticated cool techs to enrich the player experience.

2) previously, "upstream cold" officially announced the launch of China's first "game GPT". Based on the latest AI technology, its "intelligent NPC" system can achieve "free interaction without settings" and can take into account the needs of all types of players.

1.2 "upstream cold" IP and mobile games products have a very high degree of attention, mobile games online reservations of nearly 16 million. "against the current Cold" and IP PC games have made outstanding achievements since they were launched in 2018, with up to 500,000 players online at the same time during the fourth anniversary celebration. Players use PC games to bring their own "Song Yingpu" video editing software to produce short animated videos with high traffic on Douyin and other platforms, and a good atmosphere for mass entrepreneurship and innovation.

2. NetEase, Inc's PC game pulled 22 years of growth, and Blizzard ended the cooperation and briefly affected the current gross profit.

2.1 PC games have been an important growth engine for NetEase, Inc games in the past 22 years. Company 22 achieved annual revenue of 96.5 billion yuan, + 10% year-on-year, adjusted net profit of 22.8 billion yuan, + 15% year-on-year, and revenue from games and related value-added services reached 74.6 billion yuan, an increase of 9.9% over the same period last year, including + 5.2% for mobile games and + 21% for PC games.

2.2 the decline in gross margin in the gaming business is due to short-term effects. Q4 achieved 19 billion yuan in revenue from games and value-added services in a single quarter, a slight increase of 1.6% over the same period last year, and the gross profit margin of the business fell to 59.1% from the previous quarter, mainly due to the end of cooperation in the fourth quarter of Blizzard games and one-time confirmation of copyright fees, which will not have a lasting impact.

3. "Egg Party" can be expected for a long time. After the long-term operation of mobile game works such as "Egg Party", such as "against the Cold", the user scale and income have grown abruptly since the beginning of 2023, and it has been in the top three of China's iOS best-selling list for a long time. As a breakthrough in NetEda's DAU products, its DAU has exceeded 30 million, and the company attaches great importance to it, emphasizing the need for long-term operation of this project.

This year, we will pay attention to the overseas launch of the mobile games "against the cold" and "Harry Potter: the Magic Awakening", and we can look forward to the launch of the mobile games "forever robbed forever". Long-term concern about the company's global game studio layout, in January acquired the Canadian studio SkyBox Labs, which has codeveloped Halo: infinite, my World and radiation 76, NetEase, Inc also established a global studio Spliced in February, team members from R Star, Activision Blizzard and other companies, has participated in the development of large-scale games such as GTA, call of Duty, Rocket Alliance, etc. NetEase, Inc's overseas studios are mostly positioned as 3A masterpieces, with a relatively long investment cycle, and are expected to begin to contribute income after 25 years.

Profit forecast: we predict that the company's revenue from 2023 to 2025 will be 1061x1176 / 130.8 billion yuan, and the net profit will be 254.5 billion yuan, and the adjusted net profit will be 236261max 29 billion yuan respectively. Maintain the recommended rating.

Risk hint: the launch results of major game products are not as expected; the uncertainty risk of overseas release of games; and the progress of studio development is not as expected.

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