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<Research>BOCOMI: Renewed Collaboration of NTES-S & Blizzard Has Limited Impact on ST Results, but Raises LT Room for Overseas CooperationBOCOMI highlighted in a report that on 10 April (yesterday), Blizzard China and NTES-S (09999.HK) jointly announced a renewal of their agreement, and Blizzard games will gradually return to the China market starting this summer.
The broker said Blizzard's resumption of cooperation will have a limited impact on NetEase's short-term results, while the agreement between NetEase and Microsoft, will help to increase the room for long-term overseas cooperation between the two parties.
According to BOCOMI, NetEase's agreement with Microsoft to promote the launch of the former's new games on XBOX and other platforms will be beneficial to NetEase's multi-terminal deployment of games overseas.
The agency service contract between the two parties in Mainland China was terminated in January 2023, which resulted in a
17% YoY decline in NetEase's 2023 online game revenue.Related News: CICC: Blizzard's National Service Returns, Concern on NTES-S Self-developed New Product Development
Assuming that the performances of legacy games are stable, the broker estimated that the revenue from operating Blizzard's games in 2022 was about RMB3.9 billion, accounting for less
than 5% of NetEase's total revenue. Considering that the profit margin of licensed games is lower than that of self-developed games, it is expected that the contribution of Blizzard's games to profit will be even more limited.
Assuming that Blizzard's Chinese servers will return in 2H24, the broker expected NetEase's online game revenue in 2024 and 2025 will be adjusted upward by 11% and 19% respectively compared with the previous forecasts and online games will resume a growth rate of more than 20% in 2H.
It is expected to contribute an upward adjustment of 2-3% to the company's annual total revenue, and the impact on profit will be limited.
Based on the recent revenue fluctuations, BOCOMI lowered its 2024 revenue and profit expectations on NetEase by 2% and 4%, and lowered its H-share target price from $206 to $194.
The broker expected the launch of heavyweight handheld games "Naraka Bladepoint Mobile" and "Where Winds Meet" this year, to boost the company's game revenue growth, and maintained its Buy rating.
Related News: HSBC Global Research Prefers Meituan/ Tencent/ NetEase/ PDD Among CN New Econ Stocks
Source: AAStocks Financial News
http://www.aastocks.com/en/stocks/news/ ... -news/AAFN
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