网易(NTES US) - 第二季度业绩符合预期，看好下半年游戏业务前景

Inline 2Q25 earnings; upbeat on 2H25 gamebusiness outlook Target PriceUS$160.00(Previous TPUS$136.50)Up/Downside23.4%Current PriceUS$129.67 NetEase reported 2Q25 results:total revenue increased by 9%YoY toRMB27.9bn, 2% below Bloombergconsensus estimate; non-GAAP net incomewas up by 22% YoY to RMB9.5bn, largely in line with consensus estimate.Weexpect the slower-than-expected games revenue growth to impact short-terminvestor sentiment, but we also note that the games revenue outlookin2H25Eremainsresilient(+13%YoY on our estimate),supported by the solidperformance ofevergreengames and strong growth of contract liabilities in2Q25 (+25% YoY).We maintain our FY25-27 earnings forecasts largelyunchanged.We lift our SOTP-derived target price to US$160.0(previous:US$136.5),given the valuation rerating ofthegames sector. Maintain BUY onsolid games andearningsoutlook in 2H25E. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Evergreen gamesdeliveredsolid performance.Games & related VASrevenuegrew by 14% YoY toRMB22.8bn in 2Q25. Contract liabilitiesmaintained healthy growth of 25% YoY to RMB17.0bn as of Jun 2025.Severalevergreengames achieved strong performance afterthecontentupdate in July, whichshouldpave way for solid gamesrevenuegrowthin2H25E, in our view.Sword of Justice,Identity V,Naraka: Bladepoint mobileandEggy Partyall reached top 10 positions onChina's iOS grossing chartafteranniversaryor seasonalupdatein July.Managementnotes thatWhereWinds Meetcontinuedto deliver solid performance sinceitslaunch,andexceededexpectationsin terms of both active users and monetization.Looking ahead, several new games are lined up for global launch, includingDiablo II Remastered(27Aug),Destiny: Rising(28Aug),ocean adventureRPGSea of Remnants(2026E),and story-driven action game BloodMessage(2026E). Ye TAO, CFAfranktao@cmbi.com.hk Joanna Ma(852) 3761 8838joannama@cmbi.com.hk Stock Data Source: FactSet Non-gaming businessesfocus on quality growth.NetEase Cloud musicrevenuedecreasedby4% YoY to RMB1.97bn in2Q25,but with music GPMup by 4.0pptsYoY to 36.1%, mainly supported by operating leverage andgrowth oftheonline music business.Youdao revenuegrewby7% YoY toRMB1.42bn in 2Q25,primarily driven by growth of online marketingservices. Innovative businessesand othersrevenue was down by 18% YoYtoRMB1.70bn in2Q25. Better-than-expected margin expansion.Margin expansion continued tobeat expectation: 1) GPM improved by 1.8pptsYoY to 64.7% in 2Q25,primarilyattributable to the optimized channel costs andfavourablerevenuemix shift to self-developed games;2) OPM increased by 5.0pptsYoY to32.5% in 2Q25,thanks to the operating leverage. S&M/G&A expenses ratiowas down 0.9/1.9ppts YoY to 12.8%/15.6% in 2Q25. We expect S&Mexpenses to grow by 19% YoY in 2H25E, as NetEase entered a morenormalizedcycle to promote both new and legacy games. Overall, weexpect OPM to increase by 5pptsYoY to 32.8%inFY25. Source: FactSet We use sum-of-the-parts (SOTP)valuation methodology to value NetEase’s four mainbusiness segments. Our SOTP-derived target price is US$160.0, comprising: 1) US$144.0for the online game business (90.0% of total valuation), based on20x 2025EEV/EBIT which ison par withthe industryaverage. 2) US$0.9for Youdao (0.5% of total valuation), based on1.2x 2025E EV/revenue, on parwith the industry average; 3) US$4.9(3.1% of total valuation) for theNetEaseCloud Music business, based on4.7x2025E EV/revenue,on par with theindustry average; 4) US$1.6(1.0% of total valuation) for the innovative businesses and others, based on1.0x2025EEV/revenue, on par with the industry average; 5) US$8.7for net cash. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst coveredin this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s)covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer ofany of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD:Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock wit