2Q17 gaming softness is in-line with our preview note (Jul 6)    In 2Q17, total revenue grew 49% YoY or -2% QoQ to RMB13.4bn, 3% above consensus, driven by stronger-than-expected eC performance. Mobile gaming contributed 72.4% of online gaming revenue in 2Q17 (73.3% in 1Q17), up 73% YoY or -13% QoQ (vs our forecasts -15% QoQ),which is generally in-line with our preview note on Jul 6 -“we expect a temporary softness in mobile gaming”. On new game pipeline, Minecraftfor PC JAVA version started open beta on 8August with positive preliminary feedback, and mobile version will also enter open beta in 3Q17. Mgt wasalso positive onIndexand Forever 7, Japanese-themed RPGs (to be launched by 2017-end). Onmyoji is performingwell in Korea, with #1 ranking in download, #7 in grossing. However, we expect overall gaming revenue to remain anemic in 3Q17. Overall non-GAAP gross margin eased 8.3pp YoY to 51.9% in 2Q17 given the rising revenue share of lower-margin businesses (mobile games and e-commerce revenue). Non-GAAP operating margin also declined 7.5pp YoY or 8.8pp QoQ mainly due to higher selling & marketing costs (game and eC promotion). Non-GAAP net income grew 8% YoY or -20% QoQ to RMB3.5bn in 2Q17,5% below consensus.    Kaola & Yanxuan to trackedstrongly in 2Q as we have expected    E-mail, E-commerce and Others jumped 69% YoY or 36% QoQ to RMB3.4bn in 2Q17, accounting for 25% of total revenue (1Q17 18%), driven by swift growth in Kaola and YanXuan. Gross margin of this segment slipped 22.5pp YoY or 3.5pp QoQ to 11.3% in 2Q17 due to a change in product mix. Mgt expectedeCbusinessesto enjoy stable margins, andfocus on share expansion and provide marketing subsidy during promotional season. A more detailed disclosure is likely in 2H17.    Maintain BUY;TP raised to US$355    NetEase is trading at 14x FY18E EV/EBITDA, at a discount to its largest competitor, Tencent (30x).We rollover our valuation toFY18E, raised our TP from US$354 to US$355, based on FY18EEV/EBITDAof 15.3x.

声明：如本站内容不慎侵犯了您的权益，请联系邮箱：wangshiyuan@epins.cn 我们将迅速删除。