Blue Lotus Non US Internet research, Blue Lotus Research Institute

Ying Pan

Blue Lotus Non US Internet research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>NetEase reported C2Q24 top line, GAAP operating profit and GAAP net income in line, (5.6%) and (7.3%) vs. our estimates, and in line, (4.0%) and (5.5%) vs. consensus. </li>
<li>We believe game growth will materially accelerate in C2H24 and 2025, based on our projection for Naraka Mobile, Where Winds Meet and the two Marvel games. </li>
<li>We keep TP of US$122 unchanged and maintain BUY .</li>
</ul>


NetEase reported C2Q24 top line, GAAP operating profit and GAAP net income in line, (5.6%) and (7.3%) vs. our estimates, and in line, (4.0%) and (5.5%) vs. consensus. 
We believe game growth will materially accelerate in C2H24 and 2025, based on our projection for Naraka Mobile, Where Winds Meet and the two Marvel games. 
We keep TP of US$122 unchanged and maintain BUY .


[NetEase (NTES US, BUY, TP US$122) Review]: Growth Will Materially Accelerate in C2H24 and 2025

Chief Executive Officer, Emmer Capital Partners Limited

Manishi Raychaudhuri

Chief Executive Officer

Emmer Capital Partners Limited

Emmer Capital Partners is an Asia Pacific focused financial advisory firm engaging in strategic financial asset allocation advice, bespoke thematic research and advising early-stage companies and connecting them to investors. Emmer Capital provides macro-economic and multi-asset investment strategy inputs to institutions, family offices, private wealth managers, private equity, and corporate boards directly and through independent research platforms. Emmer Capital also advises a wide range of startup companies on fund raising and business strategy. Emmer Capital's active engagement with the print and electronic media reaches a broad spectrum of investors across the globe.

<ul>
<li>Asian buybacks, dominated by HK, China and Korea, are skyrocketing.  In H125, buybacks more than doubled from their full year 2024 levels in HK/China and increased 40% in Korea. </li>
<li>We screen companies repurchasing consistently, with total buyback of minimum $1bn and buyback over 2024-25 of at least 2% of present market cap, yielding companies in HK(11), Korea(6), Philippines(2), Singapore(1).</li>
<li>Top five repurchasers are Alibaba, Tencent, China Communication Construction, AIA, Netease. These, barring the third, are up more than 20% this year. Share price support from buybacks do seem solid.</li>
</ul>


Asian buybacks, dominated by HK, China and Korea, are skyrocketing.  In H125, buybacks more than doubled from their full year 2024 levels in HK/China and increased 40% in Korea. 
We screen companies repurchasing consistently, with total buyback of minimum $1bn and buyback over 2024-25 of at least 2% of present market cap, yielding companies in HK(11), Korea(6), Philippines(2), Singapore(1).
Top five repurchasers are Alibaba, Tencent, China Communication Construction, AIA, Netease. These, barring the third, are up more than 20% this year. Share price support from buybacks do seem solid.


Asian Buybacks Accelerating; Consistent Share Repurchasers Offer Safety

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 reported inline 2Q24 results: total revenue grew by 6% YoY to RMB25.5bn, in line with our/consensus estimate of RMB25.1/26.1bn; operating profit grew by 15% YoY to RMB7.0bn, vs our/consensus estimate of RMB6.7/7.2bn.</li><li>Looking ahead, we expect game revenue growth to bottom out and reaccelerate in 2H24E, underpinned by the resilient performance of legacy titles, incremental revenue contribution from new titles and the return of Blizzard’s game portfolio.</li><li>We maintain our FY24-26E total revenue forecast largely unchanged. We fine-tune our SOTP-derived target price to US$130.0 (previous: US$131.5). Maintain BUY.</li></ul><p><em>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.</em></p>

NetEase reported inline 2Q24 results: total revenue grew by 6% YoY to RMB25.5bn, in line with our/consensus estimate of RMB25.1/26.1bn; operating profit grew by 15% YoY to RMB7.0bn, vs our/consensus estimate of RMB6.7/7.2bn.Looking ahead, we expect game revenue growth to bottom out and reaccelerate in 2H24E, underpinned by the resilient performance of legacy titles, incremental revenue contribution from new titles and the return of Blizzard’s game portfolio.We maintain our FY24-26E total revenue forecast largely unchanged. We fine-tune our SOTP-derived target price to US$130.0 (previous: US$131.5). Maintain BUY.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) - Intact Quality Game Portfolio Despite Short-Term Growth Deceleration

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>The review period for the June rebalance of the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">HSTECH INDEX</a> ended on 31 March, the changes will be announced on 16 May and implemented on 6 June.</li>
<li>Following the launch of the God's Eye ADAS, <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> could become eligible for index inclusion after meeting the Autonomous theme and Innovation screening.</li>
<li>The inclusion of <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> in the index could result in <a href="https://www.smartkarma.com/entities/china-literature-ltd" target="_blank" data-smartkarma-citation="entities:24388:1" rel="noopener">China Literature (772 HK)</a> being deleted from the index in June.</li>
</ul>


The review period for the June rebalance of the HSTECH INDEX ended on 31 March, the changes will be announced on 16 May and implemented on 6 June.
Following the launch of the God's Eye ADAS, BYD (1211 HK) could become eligible for index inclusion after meeting the Autonomous theme and Innovation screening.
The inclusion of BYD (1211 HK) in the index could result in China Literature (772 HK) being deleted from the index in June.


HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade

Thematic (Sector/Industry)

<ul>
<li>With consumption in the doldrums, one would expect none growing at double digits. This is actually not the case; </li>
<li>Further, how many Chinese Growth Equity names are accelerating in growth in the second half? Quite a lot;</li>
<li>We reiterate our view that Chinese Internet names are took-all winners with strong pricing power, which are showing when they need to. The weak market sentiment is self-fulfilling.</li>
</ul>


With consumption in the doldrums, one would expect none growing at double digits. This is actually not the case; 
Further, how many Chinese Growth Equity names are accelerating in growth in the second half? Quite a lot;
We reiterate our view that Chinese Internet names are took-all winners with strong pricing power, which are showing when they need to. The weak market sentiment is self-fulfilling.


How Many Chinese Growth Equity Names Are Growing at Double Digits?

China

NetEase, Inc. operates as an leading internet technology company providing online services including content, community, communication, and commerce. The Company develops and operates online games, electronic commerce, internet media, innovative business, and other businesses. NetEase expands its businesses to Japan, North American, and other other international markets.

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NetEase (9999 HK)

[NetEase (NTES US, BUY, TP US$122) Review]: Growth Will Materially Accelerate in C2H24 and 2025

NetEase's Q2 results meet expectations, with projected game growth in the second half of 2024 and 2025. Analysts maintain a BUY rating with a...

Blue Lotus Research Institute

NetEase (NTES US) - Intact Quality Game Portfolio Despite Short-Term Growth Deceleration

We maintain our FY24-26E total revenue forecast largely unchanged. We fine-tune our SOTP-derived target price to US$130.0 (previous: US$131.5)....

CMB International

HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade

BYD could replace China Literature in the HSTECH in June. There will be FAF upweights for a few stocks. Funding outflows will be big and there will...

Brian Freitas

How Many Chinese Growth Equity Names Are Growing at Double Digits?

More Chinese growth equity names growing at double digit than single and more are accelerating in growth in C2H24. Pessimism can turn into self...

Blue Lotus Research Institute

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[NetEase (NTES US, BUY, TP US$122) Review]: Growth Will Materially Accelerate in C2H24 and 2025

​NetEase's Q2 results meet expectations, with projected game growth in the second half of 2024 and 2025. Analysts maintain a BUY rating with a...

Blue Lotus Research Institute

Asian Buybacks Accelerating; Consistent Share Repurchasers Offer Safety

​Asian buybacks, led by HK, CN, KR, are surging. Buybacks more than doubled in H125 relative to full year 24 levels. Top consistent repurchasers:...

Manishi Raychaudhuri

NetEase (NTES US) - Intact Quality Game Portfolio Despite Short-Term Growth Deceleration

We maintain our FY24-26E total revenue forecast largely unchanged. We fine-tune our SOTP-derived target price to US$130.0 (previous: US$131.5)....

CMB International

HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade

BYD could replace China Literature in the HSTECH in June. There will be FAF upweights for a few stocks. Funding outflows will be big and there will...

Brian Freitas

How Many Chinese Growth Equity Names Are Growing at Double Digits?

More Chinese growth equity names growing at double digit than single and more are accelerating in growth in C2H24. Pessimism can turn into self...

Blue Lotus Research Institute

NetEase's Q2 results meet expectations, with projected game growth in the second half of 2024 and 2025. Analysts maintain a BUY rating with a...

Asian buybacks, led by HK, CN, KR, are surging. Buybacks more than doubled in H125 relative to full year 24 levels. Top consistent repurchasers:...