＜Research＞Citi Reduces NetEase (NTES.US) TP to US$116, Cuts 2Q24 Rev. & NP Forecasts

　　NTES-S (09999.HK) +6.000 (+4.231%) Short selling $101.71M; Ratio 18.693% (NTES.US) will announce its 2Q24 results in mid-August, Citi highlighted in a research report.

　　Taking into account the impact of trading system adjustments to the PC version of Fantasy Westward Journey (FWJ), the broker lowered its 2Q revenue forecast on NetEase by 3.2% to RMB25.9 billion, representing a 7.8% YoY growth, while its non-GAAP net profit forecast was dropped by 0.9% to RMB7.35 billion. These are below the consensus forecast of RMB26.2 billion and RMB7.93 billion for revenue and non-GAAP net profit respectively.

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　　Citi estimated that NetEase's game revenue would grow 8% YoY to RMB20.3 billion in 2Q, with the impact on the PC version of FWJ partially offset by growth in the mobile game business. The broker pointed out that NetEase will launch a number of heavyweight games this year, including Where Winds Meet and Starzone Elite, which are expected to support the overall game revenue growth.

　　Nevertheless, the broker believed negative impacts from the PC version of FWJ would drag PC game revenue into a decline of 9%, 8% and 7% in 2Q/3Q/4Q of 2024, and will only return to normal in 1Q25.

　　Accordingly, Citi trimmed NetEase's revenue forecasts for 2024/25/26 by 3.9%, 5.7% and 4.3%, and its non-GAAP net profit forecasts by 2.3%, 3.5% and 1.4%, respectively. The broker lowered its target price on NetEase US shares to US$116 and rated the stock Buy.

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　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-06-25 16:25.) (Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)

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