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Second listing, NetEase return game "old gun" can tell what new story?

via:博客园     time:2020/5/31 9:02:14     readed:800


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Wen/Shen Zhou

Source: State of Entrepreneurship (ID:ichuangyebang)

Netease has been repeatedly spread, today back to Hong Kong curtain officially opened.

At noon on May 29, Netease, a US stock company( NYSE:DAO )Officially passed the hearing on the Hong Kong Stock Exchange and formally submitted the prospectus for listing in Hong Kong.

In the hearing document, Ding Lei, CEO of Netease, released a report entitledThe power to love firstThis is also the first letter to all shareholders in Netease's 20 years of listing. He said Netease was preparing to go public in Hong Kong

In fact, the second listing of Netease on the Hong Kong Stock Exchange has a lot to do with the change of the capital market environment. Ruixing's financial fraud triggered the trust crisis of China equity market. Nasdaq Stock Exchange of the United States revised the listing rules, raised the listing threshold, and increased the supervision and punishment.

Chen Duan, director of the China Economic Digital Economy Research Center and deputy director of the journalism department of the Central University of Finance and Economics, told Chuang Chuang Bang

At present, the total share capital of Netease is 3257.9 million shares, and the company holds 130 million ads shares. Based on the current share price of $366.25, the total market value of the company is $47.7 billion. Each share is equivalent to US $14.65, equivalent to HK $113.58 (Note: the specific issued share capital listed in Hong Kong has not been disclosed, and the share capital in Hong Kong is not included in this paper).


(photo source: tonghuashun)

Games continue to contribute massive cash flow

The prospectus shows that NetEase's main business is games, online education (NetEase Youdao) and innovative business (e-commerce, music, etc.).

Among them, the game contributes the largest revenue with an average gross profit rate of about 60%, while the gross profit of online education is only about 25%, and the gross profit of e-commerce is only more than 10%.

In view of the high gross profit margin of the game, Netease has been deeply involved in the game field.

Recently, foreign media TweakTown news editors Derek Strickland published their statistics

There are two Chinese companies on the list, Tencent ranked second with $16.224 billion, and Netease ranked fifth with $6.668 billion.

Netease has successfully entered the head camp of global game companies.

NetEase 2020 Q1 results show that the first quarter net income of 17.1 billion yuan, including game business net income of 13.5 billion yuan, revenue accounted for 78.9%. Game in the netease revenue leadership can be seen.

In the past period, Netease's game business has maintained high revenue and positive growth rate. In the four quarters of 2019, its game revenue has maintained a volume of 10 billion, with a year-on-year growth of 35.26%, 13.60%, 11.50% and 5.30% respectively.


(data source: financial report, prepared by Chuangye state)

From the recent developments of NetEase is also not difficult to see, NetEase gradually return the focus of business to the game. Recently held 520 conference, NetEase launched 20 games in one breath.

Currently, netease's main flagship IP《 dream travel "," onmyoji "growth stability and the introduction of by-products, the cooperation of" world of warcraft "also performance stability, the direction of the sea products" wilderness action "," fifth personality "in the overseas region ranking, is expected to increase overseas promotion this year, and launch more flagship game by-products.

Tiger securities investment and research team to venture state, said:

It can be concluded that as long as continuous efforts to self-research and stable launch of a series of products, the next period of time NetEase's game business may be in the head position, contributing to a steady stream of cash flow.

Compared to the realizability of the game, NetEase hatched out of the NetEase Youdao (NYSE:DAO), hereinafter referred to as

In 2018, NetEase Youdao received 732 million yuan, accounting for only 1.43 percent of NetEase's overall revenue. Youdao went public on October 25,2019, and spun off from NetEase earnings after listing.

According to the prospectus, the net income of online education service Netease Youdao reached 540 million yuan in the first quarter, a year-on-year increase of 139.8%; before that, Netease Youdao achieved an annual operating income of 1.305 billion yuan in 2019, a year-on-year increase of 78.28%; net loss attributable to the parent increased from 239 million yuan to 647 million yuan.

At the same time of nearly 80% increase in operating revenue, Netease Youdao's net loss is still expanding, which is a typical increase in revenue without increase in profit.


(Source: Financial Reporting Form)

The reason behind this is that we have to face the high expenditure of three fees in the early stage of occupying the k12 education field. Under the background of the fierce competition in the whole online education industry, in order to obtain more users, almost all online education enterprises have put their efforts into marketing. In order to maintain the position of the industry and expand the market scale, Netease Youdao also joined the marketing war.

Netease Youdao's three-fee expenditure increased significantly in 2019, with the most prominent growth in marketing expenses, rising from 213 million yuan in 2018 to 622 million yuan, accounting for 47.7 percent of operating income, that is, in 2019 NetEase Youdao invested nearly half of its annual revenue in marketing.

However, as the student population increases, the marginal effect is enhanced. Good gross margins have jumped to 43.5% from around 30% in 18 years.

However, in the short term, the road of profit has not yet begun, and the moat has not been built in K12 field in terms of user scale and other aspects.

Sell the koala, spin off the sideline, do not do the business that you are not good at

2020Q1, Netease also has an obvious change, is to package e-commerce business data directly to the

In September 2019, Alibaba acquired koala with a total investment of US $2 billion, so koala Haigou also officially joined Alibaba's economy.

Once as one of the key incubators of NetEase, cross-border e-commerce platform

In 2016, Ding Lei even said publicly that he hoped that in the next three to five years, koala would reach the scale of RMB 50 billion to RMB 100 billion and create another Netease in the e-commerce battlefield.

However, before rebuilding a Netease, Netease's e-commerce business revenue growth fell into a bottleneck.

In 2018, the annual growth rate of e-commerce plummeted to 64.82% from 156.9% in 2017, which further slowed the growth rate of Netease's total revenue to the lowest level since 2014.

Previously, some analysts believed that this was due to Ding Lei's two-way trade-offs and considerations. Although e-commerce's profitability is improving, koala has not made real profits; however, e-commerce has just broken the 10% gross profit rate, which is too hard for the game business to maintain more than 60% gross profit rate all the year round; at the same time, the risk of e-commerce assets is like a time bomb, once the operation capacity declines, it may detonate.

Earlier, NetEase CFO Yang Zhaopin also said he did not support a fast- fast-growing model in exchange for losses

At present, the prospectus shows that innovative businesses include Netease strict selection, Netease cloud music, advertising services, e-mail and other value-added services.

Of these, NetEase cloud music 2018 to 2019 Q2 revenue for the actual announcement of revenue, a quarter in the range of 10-12 billion, about a fifth of Tencent music.

Some analysts told chuangyeong bang that both Netease koala and Netease yanxuan endorsed their own platform brands for e-commerce business, which benefits consumers through OEM mode and bargaining power. There is no mistake in thinking, but Netease itself is not an e-commerce company, and its e-commerce diversion advantage is not very strong.

Netease needs new stories

Actually, the future outbreak point of the whole Internet economy has gradually become clear, under the new infrastructure ,5 G base station construction, big data center, artificial intelligence, industrial Internet has become a new investment hot spot.

In the last round of Internet and mobile Internet competition, Netease fell out of the top three. Facing the new competition in artificial intelligence and other fields, Netease must make a difference. Netease needs new growth points, otherwise it may face a new round of reshuffle in the future.

Ding Lei also said in an open letter today that Netease will focus on the following four directions in the next step: the first is to build an organization with self evolution ability. From today on, Netease will require all managers to quickly and massively tap all kinds of young talents to help them get training faster. The second is to continue to implement the strategy of quality products. Third, firmly promote the strategy of globalization. Finally, promote more inclusive resources.

Returning to Hong Kong for listing is a new opportunity for Netease. Fundraising brings more chips for Netease. The so-called hands have grain, the heart does not panic, the market expects Ding Lei to bring a new story.

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