With the selection of the value list of Jinqilin listed companies in Hong Kong stock market opened, thousands of companies will compete fiercely for the eight Project Awards. Who is the most leading entrepreneur, such as Zhang Yong, Yu Liang, Wang Xing, Lei Jun, Xu Jiayin and Ding Lei.
the company’s 20-year Q2 performance exceeded expectations, the company’s classic games remained stable month on month, and the mobile game business maintained growth. At the same time, the company’s key products have won the edition number, which is expected to promote the continuous growth of the game business. The business performance of the game is strong, and it is less affected by political factors. The rapid development of online education business, at the same time, Netease cloud music has opened a diversified cash exploration. The company’s fundamentals are stable and continue to improve, maintaining the “buy” rating.
in 2020q2, Netease achieved revenue of RMB 18.185 billion, with a year-on-year increase of + 25.9% and a month on month basis of + 2.3%; the net profit attributable to the parent company was RMB 4.538 billion, with a year-on-year increase of 47.7% and a month on month growth of 27.8%, and its performance exceeded market expectations. The company’s gross profit margin remained relatively stable, with Q2 gross profit margin of 53.8%, increased by 0.3 PCT year-on-year and decreased by 1.1 PCTs month on month. The rate was slightly increased. Q2 sales / management / R & D expenses were 2.321 billion yuan / 893 million yuan / 2.408 billion yuan, corresponding to 12.8% / 5.0% / 13.2% respectively. The overall slightly increased, mainly due to the company’s increased investment in marketing, R & D, etc.
Q2 game revenue reached 13.828 billion yuan, which was + 20.9% year-on-year. Among them, the mobile game revenue was 9.998 billion yuan, up 21.1% year-on-year and 5.2% month on month. Mobile game revenue growth was driven by classic IP games such as 3D, H5, wilderness action, after tomorrow, and invincible; PC game revenue reached 3.83 billion yuan, up 20% year-on-year, mainly driven by the update of classic game copies such as world of Warcraft. The company is about to launch outstanding works such as Yin Yang master: Monster House, Tianyu, qiannu ghost hidden world record, which is expected to continue to drive the company’s growth.
the company’s overseas game revenue has accounted for more than 10%, mainly driven by the strong growth of operation wilderness and after tomorrow in Japan. Among them, “wilderness action” successfully linked with the popular animation “Tokyo manga” and dominated the list of Japanese IOS bestsellers for nearly a week. The company has formed a long-term layout in the field of game offshore through self-study, IP cooperation, investment and M & A, and has obtained the IP authorization of overseas heads such as Harry Potter and Lord of the rings.
Youdao’s revenue in 2020q2 was 623 million yuan, + 93.1% year-on-year and + 15.1% month on month; the gross profit rate was 45.2%, with a year-on-year increase of + 12.3 PCTs. Among them, the number of K-12 paying students reached 329000, which was + 358.9% year-on-year. The per capita payment of Youdao excellent course was 1139 yuan, which was + 29.4% year on year. In the future, Youdao will strengthen the marketing and customer acquisition transformation while iterating the course products, so as to further expand the scale of paying users. Innovation business and other businesses achieved revenue of 3.733 billion yuan, a year-on-year increase of 38.7%; gross profit margin of 18.5%, year-on-year + 3.0 PCTs. The growth of innovation business is mainly driven by Netease cloud music, and the revenue from subscription and live broadcasting has continued to increase. Cloud music and Universal Music Group have reached an authorized cooperation, which will gain greater initiative in the field of copyright. In the future, Netease cloud music will expand a diversified business model in addition to paying members, so as to improve the liquidity of products.
the company’s fundamentals are solid, the game business keeps growing, classic games are steadily rising, and new product reserves are abundant, overseas and head IP cooperation, and less affected by geopolitics, are expected to continue to break through; online education and innovation business maintain rapid growth. We adjust the EPS forecast from 2020 to 2022 to 4.7 / 5.5 / 6.0 yuan, and the current price corresponds to 28x / 24x / 22x times of PE. Considering the company’s robust game business, online education business with sustained high growth and Netease cloud music, it is expected that IPO will bring valuation premium and maintain “buy” rating.