The analyst rating from CLSA on NTES-S (09999.HK) is maintained as "Outperform" despite a slight reduction in the adjusted net profit forecast for 2026 by 2%. The reasoning behind this rating includes the following points:
1. 4Q25 Results Below Expectations: The company's total revenue and adjusted EBIT for the fourth quarter were below CLSA's forecasts, indicating some short-term challenges.
2. Online Game Revenue Missed Forecast: The revenue from online games grew only 3.5% YoY, which was attributed to a high base from the previous year and a shift in revenue recognition for new games.
3. Improved Deferred Revenue Growth: Despite the revenue miss, there was a notable acceleration in deferred revenue growth, which increased by 5% QoQ and 32% YoY, suggesting potential future revenue.
4. Stronger Game Pipeline for 2026: CLSA is optimistic about the game pipeline for 2026, highlighting upcoming titles like the Diablo IV expansion pack, Sea of Remnants, and Ananta, which could drive future growth.
Overall, while there are short-term concerns reflected in the recent results, the long-term outlook remains positive due to a stronger game pipeline, justifying the "Outperform" rating.
