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China Merchants Securities expects Tencent’s Q2 revenue to grow by 14% on year, with value-added services, advertising, and fintech growing 10%, 22%, and 17% respectively.
In terms of the gaming business, Tencent’s key games “Honor of Kings” and “Peacekeeper” performed weakly in May, but showed recovery in June, it said.
The broker expects Tencent’s top 3 to 10 existing games to grow 26% year over year in terms of gross billing in the second quarter, and looked forward to the recent release of “Valorant mobile” and the upcoming release of “Lost Ark mobile” at the end of July. It expected Tencent’s non-IFRS net profit to rise 31% on year to 36.8 billion yuan in Q2, non-IFRS net margin to reach 24.1%.
Tencent’s largest shareholder Naspers plans to continue to cut its stake by 2 – 3 percentage points per year and to cut it to about 24% – 25% by the end of 2023. The broker reiterated that investors have priced in stake cut.
The broker was optimistic about Tencent’s prospects for revenue recovery and margin expansion, but expected a more modest rate of growth given its investments in content, products and AI technology. The broker believed the company will continue to buy back shares.
CMS maintained the target price of Tencent stocks at HK$426, keep a Buy rating. Tencent stocks fell 1% to close at HK$333 in Hong Kong on Wednesday.
