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JPMorgan placed Chinese gaming giant NetEase on Positive Catalyst Watch, expecting the company to benefit from the robust performance of its game titles, such as Justice Mobile, Eggy Party, Dunk City Dynasty.
The company’s revenue in the third and fourth quarter this year is expected to surpass the previous expectations, and driven by the revenue leverage of new game titles and growing revenue contributions from the in-house distribution channel, the gross margin should improve in the second half, JPMorgan said in a note.
The broker forecast further positive revisions to the forecast of NetEase’s 2023-24 earnings, which would support share prices.
JPMorgan forecast NetEase’s share price will extend its outperformance against the broader market, despite its year-to-date gain of 40%. The company is currently trading at 14x / 13x 2023/2024 P/E and still at a more than 30% discount to its global peers like Tencent and Nintendo at around 20x.
JPMorgan viewed NetEase as the top pick in China’s gaming sector. The rating on the stock was kept at Overweight, with a target price of HK$195.