NTES: Putting Away Money Losing Businesses To Focus On Game And Margin; Positive On Future Margin Improvement; Maintain Buy
NTES will report 3Q19 results on November 20th after the markets close followed by a 9pm EST conference call. We are positive on NTES’s performance into 3Q19. NTES’s focus in 2019 is to streamline its business. In September, the company sold Kaola to Alibaba (BABA, $186.97, Buy), raised external funding for its music business, and the IPO of its education business Youdao (DAO, $14.27, Not Rated). As such we expect margins to improve from 3Q19 onward. Based on our data and model, NTES’s 3Q19 revenue is likely to be at least in line with the Street consensus at RMB17,412M (accounts for one month of Kaola revenue).
T.H. Capital is an independent research and investment advisory firm specializing in China. We offers real-time, on-the-ground, bottom-up research across a wide spectrum from macro and industry analysis to company specific projects; from China ADRs to international names that have meaningful exposure to China market. We deliver relevant, comprehensive and data driven research adding immense value to clients.
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