3Q25业绩：游戏业务对质量管道和常青游戏的展望坚实

3Q25 results: solid games business outlook on evergreen games Target PriceUS$164.00(Previous TPUS$160.00)Up/Downside22.4%Current PriceUS$133.95 NetEase announced 3Q25 results:total revenue grew by 8%YoY toRMB28.4bn,3%below Bloomberg consensus estimate;operating incomeincreased by 12% YoY to RMB8.0bn, below consensus estimate of RMB9.2bn,primarilyattributable to the higher-than-expected marketing expenses.Nonetheless, we remain upbeat on the games revenuegrowthoutlook in 4Q25Eand FY26E, supported by NetEase’s quality gamepipeline, solid performanceof legacy titles and healthy growth of contractliabilities(+25% YoY in 3Q25). In China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Gamesbusiness maintained solid growth.Games&related VASrevenuewas up by 12% YoY toRMB23.3bn in3Q25, and contractliabilitiesgrew by 25% YoY to RMB19.5bn as of Sep 2025. Legacy titles continued tomaintainsolid performance: 1)Fantasy Westward Journey Onlinesaw itspeak concurrent player countsreach a new recordhigh of 3.58mn in 3Q25.2)Eggy Partydelivereda solid YoY revenue growth in 3Q25, with DAUsexceeding 30mn and average playtime hitting record highsduring the3rdanniversary in Jul.3)Where Winds Meetexperienced continued growth inboth revenue andMAUs in 3Q25, mainly supported by the newly unveiled Ye TAO, CFAfranktao@cmbi.com.hk Joanna Ma(852) 3761 8838joannama@cmbi.com.hk gamedistrict. The game also achieved success in the international market,recording a peak of over 190k concurrent players and securing the fourth Non-gaming businesses faced certain headwinds.NetEase CloudMusic revenuedeclinedby2% YoY to RMB2.0bn in3Q25,mainly due tothe decline in social entertainment revenue.Youdao revenuewas upby4%YoY to RMB1.6bn in3Q25, primarily attributable tothestrong growth of Focus on development ofquality games.Overall GPM expanded by1.2ppt YoY to 64.1% in 3Q25, mainly thanks tofavourablerevenue mix shiftto higher-margin domestic PC gamesand channel cost optimization. OPMrose by 1.0ppt YoY to 28.3% in 3Q25. S&M expenses were up by 17% YoYin 3Q25, mainly due to increased marketing spending on bothnew and 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$164.0, comprising: 1) US$140.2for the online game business (85.5% of total valuation), based on16x 2026EEV/EBIT which ison par withthe industry average. 2) US$0.7for Youdao (0.4% of total valuation), based on0.9x 2026E EV/revenue, on parwith the industry average; 3) US$3.7(2.3% of total valuation) for theNetEaseCloud Music business, based on3.4x2026E EV/revenue,on parwith the industry average; 4) US$1.4(0.8% of total valuation) for the innovative businesses and others, based on1.0x2026EEV/revenue, on par with the industry average; 5) US$17.9for net cash. Disclosures& Disclaimers Analyst Certification The 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 issuerthat 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 Ratings BUY: Stock with potential return of over 15% over next 12 monthsHOLD:Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broadmarket benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Important Disclosures There are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGMdoes not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial positionor special requirements. Past performance has no in