Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<ul>
<li>Whilst the Chinese online games market has struggled since 2023, <a href="https://www.smartkarma.com/entities/netease-inc" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a> has continued to gain revenue market share driven by the success of its mobile titles.</li>
<li>Future revenue growth will depend on the continued success of NetEase’s legacy titles and its robust pipeline of upcoming releases, including several highly anticipated launches.</li>
<li>NetEase trades nearly 2 standard deviations below its 5-year historic average PE trading range, a level that has proved to be a very good entry point.</li>
</ul>


Whilst the Chinese online games market has struggled since 2023, NetEase (9999 HK) has continued to gain revenue market share driven by the success of its mobile titles.
Future revenue growth will depend on the continued success of NetEase’s legacy titles and its robust pipeline of upcoming releases, including several highly anticipated launches.
NetEase trades nearly 2 standard deviations below its 5-year historic average PE trading range, a level that has proved to be a very good entry point.


NetEase (9999-HK): Market Share Winner, Supported by Buybacks and Dividends

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio.</li><li>Net revenue for Q1 rose to RMB 26.9 billion, marking an accelerated YoY increase led by the company's diversified game offerings.</li><li>There was significant growth from established game franchises which have managed to maintain high popularity among their user bases, showcasing the sustainability of the company’s games.</li></ul>

NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio.Net revenue for Q1 rose to RMB 26.9 billion, marking an accelerated YoY increase led by the company's diversified game offerings.There was significant growth from established game franchises which have managed to maintain high popularity among their user bases, showcasing the sustainability of the company’s games.

NetEase Inc.: Will The Increased Revenue From Game Innovation & Expansion Last?  - Major Drivers

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income grew by 12% YoY to RMB8.5bn, 2% ahead of consensus estimate thanks to the better-than-expected performance of games and music business GPM.</li><li>We are positive on its game revenue growth reacceleration in 2H24E supported by the quality game pipeline, despite that certain games adjustment and competition may cause short-term volatility.</li><li>We raise FY24-26E non-GAAP net income forecast by 2-5% to reflect the better-than-expected GPM expansion.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income grew by 12% YoY to RMB8.5bn, 2% ahead of consensus estimate thanks to the better-than-expected performance of games and music business GPM.We are positive on its game revenue growth reacceleration in 2H24E supported by the quality game pipeline, despite that certain games adjustment and competition may cause short-term volatility.We raise FY24-26E non-GAAP net income forecast by 2-5% to reflect the better-than-expected GPM expansion.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

NetEase (NTES US) - Inline 1Q24 Results; Upbeat on Game Revenue Growth Reacceleration in 2H24E

<ul><li>NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.</li><li>Popular titles such as World of Warcraft, Hearthstone, and Diablo will return to the Chinese market sequentially starting in summer 2024.</li><li>NetEase also reached an agreement with Microsoft to bring NetEase titles to Xbox and other platforms.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.Popular titles such as World of Warcraft, Hearthstone, and Diablo will return to the Chinese market sequentially starting in summer 2024.NetEase also reached an agreement with Microsoft to bring NetEase titles to Xbox and other platforms.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Netease (NTES US) - Renewed Agreement with Blizzard

Thematic (Sector/Industry)

<ul><li>Year to date, the internet sector has pulled back after rapid rallies buoyed by improved sentiment and short-term fund inflows, in line with our previous expectation.</li><li>From a full-year perspective, given the rate cut cycle has not yet started and liquidity remains tight, we suggest focusing on: 1) companies capable of boosting shareholder returns or maintaining decent returns, supported by solid fundamentals (strong competitive advantages, steady growth in core business, and stable profitability) and committed to enhancing shareholder returns (also depends on management's willingness), such as Alibaba, Tencent, and NetEase;</li><li>2) companies whose new businesses have significant market potential and are poised to bring considerable capital gains in the long run, particularly from overseas expansion and AI-related initiatives, such as Pinduoduo, Tencent, Alibaba, and Trip.com</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Year to date, the internet sector has pulled back after rapid rallies buoyed by improved sentiment and short-term fund inflows, in line with our previous expectation.From a full-year perspective, given the rate cut cycle has not yet started and liquidity remains tight, we suggest focusing on: 1) companies capable of boosting shareholder returns or maintaining decent returns, supported by solid fundamentals (strong competitive advantages, steady growth in core business, and stable profitability) and committed to enhancing shareholder returns (also depends on management's willingness), such as Alibaba, Tencent, and NetEase;2) companies whose new businesses have significant market potential and are poised to bring considerable capital gains in the long run, particularly from overseas expansion and AI-related initiatives, such as Pinduoduo, Tencent, Alibaba, and Trip.comContent is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Internet - 1Q24 recap & our three stock-picking ideas

China

NetEase, Inc. is an Internet technology company that develops applications, services and other Internet technologies in China. The Company's core businesses consist of email service, web portal and online entertainment, including online gaming services. NetEase also offers online advertising, search, mobile applications and e-commerce.

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NetEase Inc (NTES US)

NetEase Inc.: Will The Increased Revenue From Game Innovation & Expansion Last? - Major Drivers

NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio. Net revenue for Q1 rose to...

Baptista Research

NetEase (NTES US) - Inline 1Q24 Results; Upbeat on Game Revenue Growth Reacceleration in 2H24E

NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income...

CMB International

Netease (NTES US) - Renewed Agreement with Blizzard

NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.

CMB International

Internet - 1Q24 recap & our three stock-picking ideas

Year to date, the internet sector has pulled back after rapid rallies buoyed by improved sentiment and short-term fund inflows, in line with our...

CMB International

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

NetEase (9999-HK): Market Share Winner, Supported by Buybacks and Dividends

In this insight we analyse the Chinese online games market, NetEase’s revenue growth outlook, current valuation level, and shareholder returns.

Wium Malan, CFA

NetEase Inc.: Will The Increased Revenue From Game Innovation & Expansion Last? - Major Drivers

NetEase's first quarter earnings highlighted the company's ongoing growth, driven in large part by its game portfolio. Net revenue for Q1 rose to...

Baptista Research

NetEase (NTES US) - Inline 1Q24 Results; Upbeat on Game Revenue Growth Reacceleration in 2H24E

NetEase announced 1Q24 results on 23 May: total revenue was up by 7% YoY to RMB26.9bn, in line with our/consensus estimate; non-GAAP net income...

CMB International

Netease (NTES US) - Renewed Agreement with Blizzard

NetEase on 10 Apr announced the renewal of publishing agreement with Blizzard Entertainment to bring Blizzard game titles back to China.

CMB International

Internet - 1Q24 recap & our three stock-picking ideas

Year to date, the internet sector has pulled back after rapid rallies buoyed by improved sentiment and short-term fund inflows, in line with our...

CMB International