), and raised the price target from $56.00 to $61.00. In the report, Leung noted, “We lift our 13E/ 14E op margins by 1ppt to 44%/ 45% as we expect a bigger revenue mix from inhouse games (70% in 13E vs previous forecast of 67%; 85%+ gross margin) vs licensing games (~25-30% gross margin) due to: 1) increase in fees of its three inhouse games that mainly use a time-based pricing model by 50% from Feb 13: Fantasy Westward Journey, Westward Journey 2 and Westward Journey 3, which together account for 1/3+ of total sales. We expect user time of these three games to trend down from 1Q13 as the fee hikes reduce user playtime but still see higher revenue from these games after the price changes; 2) declining demand in the key licensing game, World of Warcraft, since 1Q13 as the impact of the Pandaria expansion pack that was launched in 4Q12 faded. We expect a rebound in 4Q13 due to upgrade but a long-term down trend.” NetEase closed on Monday at $54.76.