网易-S(9999.HK):经典游戏收入稳中有升 云音乐毛利率显著增长

NetEase - S (9999.HK): Classic game revenue is steady, and Shengyun Music's gross margin has increased significantly

西部證券 ·  05/28  · Researches

Incidents: NetEase's net revenue for 1Q23 was 25 billion yuan, an increase of 6.3% over the previous year; net profit from continuing non-GAAP operations was 7.6 billion yuan, an increase of 47.8% over the previous year.

Revenue from classic games is rising steadily, new games are launched one after another in the summer, and the product matrix is expected to be further enriched.

1Q23 The company's classic products performed well. The game and related business achieved net revenue of 201 billion yuan, an increase of 7.6% over the previous year. Among them, net revenue from mobile games was 13.4 billion yuan, an increase of 16.3% over the previous year, and net revenue of mobile games was 5.2 billion yuan, a decrease of 9.9% over the previous year. A number of the company's games will be intensively launched this summer, and the product matrix will be further enriched. The mobile games “Against Water Cold”, “Amazing Pioneer”, and “Peak Speed” will enter the domestic market, and “Harry Potter: The Magical Awakening” will be distributed globally. In terms of global layout, the company announced the establishment of two overseas studios developing action-adventure games, Anchor Point and Bad Brain in '23, and plans to launch “Egg Party” overseas.

Cloud Music's gross margin increased significantly. Cloud Music 1Q23's net revenue was 2 billion yuan, a decrease of 5.2% over the previous year, mainly due to the company's adjustment of some live streaming functions and share ratios, which led to a decline in social entertainment service revenue. The platform's user ecosystem maintained a good development trend, and the number of monthly active users grew steadily. At the same time, with the optimization of cost management and control capabilities, gross margin increased dramatically. 1Q23 Cloud Music's gross margin increased 10.2 pct to 22.4% year-on-year.

There is a phased contraction in business revenue. Yudao 1Q23's net revenue was 1.2 billion yuan, a decrease of 3.1% year on year, mainly due to a decline in learning service revenue due to a decrease in adult industry course revenue. 1Q23 Yudao learning service revenue was 730 million yuan, a decrease of 11.3% year on year. Excluding adult courses, learning service revenue increased 40% + year on year; 1Q23 smart device revenue affected by the epidemic decreased 16% to 210 million yuan year on year; thanks to increased demand for third-party performance advertising, 1Q23's online marketing service revenue increased 79.7% year-on-year to 220 million yuan.

Profit forecasts and investment suggestions: We expect NetEase's revenue for 2023/2024/2025 to be 1039/1155/124.6 billion yuan, +8% +8% year on year; Non-Gaap net profit is 234/263/28.6 billion yuan, an increase of +5%/+12%/+9% over the previous year. Maintain a “buy” rating.

Risk warning: The flow of new games falls short of expectations, rising marketing costs, and policy risks.

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