Bank of America/Merrill Lynch: Netease's dual listing came earlier than expected, maintaining a "buy" rating.

Bank of America Securities released a report indicating that Netease announced last Friday that, after fully complying with the relevant Hong Kong listing rules applicable to dual-primary-listed issuers, it has chosen to become a dual-primary-listed company in Hong Kong, effective from tomorrow. This change in timing is significantly earlier than the bank and market consensus expectation for the first quarter of 2027. The report stated that, as there is no impact on the company's operations, the bank believes that the key benefit of dual-primary listing in Hong Kong is the potential eligibility for inclusion in the southbound trading scheme, as dual-primary listing is a prerequisite for inclusion in the southbound trading scheme. Given that Netease has not adopted a dual-class share structure, the bank expects that Netease will be eligible for southbound trading shortly after becoming dual-primary listed. The bank believes that the first quarter of 2026 should be the bottom of short-term profit growth for Netease, and with new game releases concentrated in the later part of the year, revenue and profit will accelerate again in the second half of 2026. Bank of America maintains a "buy" rating on Netease, based on a forecasted P/E ratio of 15 times for 2026, plus net cash of $19 billion, with a target price of $172 for NASDAQ-listed shares and a target price of HK$268 for Hong Kong-listed shares.