Morgan Stanley raised forecast of Chinese online game revenue growth this year to 15% from 10%, sees NetEase as top pick

 

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The two-year CAGR of Chinese online game revenue remained stable at 7% in August, rising by 8% from the previous month and an improvement from the 2% growth in the second quarter and a drop of 6% in the first quarter, mainly driven by mobile games, Morgan Stanley said in a note citing data from Gamma Data.

The broker raised the forecast for the industry’s year-on-year revenue growth in 2023 from 10% to 15% and expected mobile game revenue to grow 20%, with growth expected to accelerate in the second half of 2023. 

Morgan Stanley’s top pick in the sector is NetEase, expecting NetEase’s mobile game revenues to grow 40% on year in the second half, driven by “Justice”, “Racing Master” and “Dunk City Dynasty”. The company’s “Eggy Party” title had 100 million monthly active users on August 23, while daily active users for “Naraka Bladepoint” have doubled since it became a free-to-play game on July 13. NetEase also intends to launch international versions of “Eggy Party” and “Racing Master” by the end of 2023. 

The broker raised the forecast of NetEase’s game revenue growth in 2023 to 15% based on its “Where Winds Meet”, “Naraka Bladepoint” mobile and “Project Mugen” titles.

Morgan Stanley expected Tencent’s domestic gaming revenue to grow 6% year over year in the second half, driven by the international version of “Honor Of Kings” as more promotions and content updates are rolled out during the Golden Week and Asian Games. 

The momentum for Tencent’s game title “MapleStory: The Legends of Maple”remains strong, while “DreamStar” launched its Beta test on 28 September.