According to Bocom Intl's research report, Netease's (09999) "Endless Journey" mobile game will be launched on July 25, with an estimated 8%/5% contribution to the company's mobile game revenue in Q3 2021 and 2024, respectively. It is expected that in Q3 2021, driven by the "Endless Journey" mobile game, the revenue from mobile games will offset the high base effect of last year's "Justice Online", and the revenue from mobile games is still expected to achieve stable growth.
The bank pointed out that the adjustment of the "Fantasy Westward Journey" PC game will end in the first half of this year, and it is expected that in Q3 2021, driven by the return of the "Warcraft" and the launch of the "Seven Days World" (global beta on July 10) and the "Yanyun Sixteen Sounds" PC games (launched on July 26), the revenue from PC games will show a recovery trend. The bank currently expects a low single-digit decline in annual PC game revenue, but there may be upward adjustment space depending on the performance of new games.
Based on the expectation of new game releases and optimization of non-game business profit, the bank adjusted its profit forecast for 2024 by 2% and maintained the target price at $117/ HKD 182, which corresponds to a game business PE ratio of 18 times in 2024. The bank maintains a buy rating on the company.