Once again, NetEase.com (Nasdaq: NTES) rises to the gamer challenge.

China's leader in online multiplayer games delivered another strong quarter last night. Revenue climbed 29% to $234.9 million, propelled by a 28% spike in its gaming stronghold and a 39% gain in its smaller online advertising business.

Earnings grew even faster, soaring 63% to $0.86 a share. There was a small foreign exchange gain this time around -- and a small forex hit a year earlier -- but NetEase still would've blasted past Wall Street expectations of $0.71 a share. After slipping a bit early last year, NetEase is back to its market-thumping ways, surpassing analyst profit targets in each of the past three quarters.

Online gaming remains NetEase's bread and butter, accounting for a thick 90% slice of the revenue mix. The company notably reintroduced Activision Blizzard's (Nasdaq: ATVI) World of Warcraft in China two years ago. It followed up with StarCraft II last month, just days after the quarter came to a close.

However, we can't underestimate the power of NetEase's own games. Westward Journey Online II set a new quarterly record for revenue and peak concurrent users, even though the game is already eight years old. NetEase certainly knows how to cultivate a loyal gamer base. Why else do you think that Activision Blizzard sought it out as its licensing partner in China?

The first quarter was apparently better than expected for China's gaming specialists. Let's take a quick look at the bottom lines of the three pure plays in this space that have already reported their financial results.



EPS est.

NetEase.com $0.86 $0.71
Changyou.com (Nasdaq: CYOU) $0.99 $0.92
Giant Interactive (NYSE: GA) $0.17 $0.14

 Source: Yahoo! Finance.

Perfect World (Nasdaq: PWRD) reports next week. Shanda Games (Nasdaq: GAME) should post quarterly results a few days later.

Despite the financial success at most of these companies, this remains a largely ignored sector. All five public players trade between 8 and 12 times next year's projected profitability. NetEase occupies the high end of the insanely cheap range -- and completely merits that position. Few stateside companies post a net margin of 48%. NetEase also closed out the quarter flush with $1.6 billion in cash.

There's a great game being played here -- and you don't need to be a gamer to win.

How many Chinese stocks are in your portfolio? Share your thoughts in the comment box below.