NTES-S(09999.HK)：2021 RECENUE IN LINE WITH EXPECTATION-格隆汇

机构：国泰君安国际
研究员：Vincent Liu

　　NetEase’s total revenue in 4Q2021 increased by 23.3% yoy to RMB24,374 million, in line with our and market expectation. Strong performance in online games services mainly resulted from the great success of new games. Cloud Music maintained its fast growth with increasing user base and Youdao showed resilience after closure of K-9 business.Non-GAAP shareholders' net profit amounted to RMB6,596 million, up 312.8% yoy and better than expectation, mainly due to significant investment income. 2021 revenue and non-GAAP shareholders' net profit increased by 18.9% and 34.4% to RMB87,606 million and RMB19,762 million, respectively.
　　We expect 2022 revenue of online games, Youdao, Cloud Music and innovative businesses and others to grow 11.7%, 2.7%, 32.5% and 8.6%, respectively. Despite the weakness and uncertainty of domestic games market, NetEase has actively sought more sources of growth by exploring international markets and developing games for non-mobile terminals. We believe that the influence from regulations to gradually diminish and margins of Yaodao will become stable. Increasing paying ratio and effective cost control are expected to further boost Cloud Music's earnings.
　　We maintain our investment rating as "Buy" but decrease our target price to HK$205.00. We expect non-GAAP shareholders’ net profit in 2022-2024 to be RMB20,849 million, RMB24,239 million and RMB26,864 million, respectively, representing yoy growth of 5.5%, 16.3% and 10.8%. Our target price represents 27.2x, 23.4x and 21.2x 2022-2024 non-GAAP PER.