NetEase Inc:2Q17a slight miss;eyeing 2H pipeline

2Q17 results were modestly soft with adj. EPS missing by 4-5%, due mainlyto GM miss on higher e-commerce exposure and higher-than-expected opex% (Fig 1). With a relatively lack of newly launched games during 2Q, thedeferred revenue declined 12% QoQ, in line with MQ. We look forward to theupcoming pipeline in 2H, including the Minecraft mobile version, which isconfirmed to be launched in 3Q, Index, and Tribe and Empires. We lower ourFY17-18E EPS by 2% each to factor in 2Q results while raising our TP toUS$346 (from US$330) after rolling over to FY18. Outperform retained.