CICC expects Tencent’s Q2 adjusted net profit to slide 20% on year, lowers price target by 4%
COMPANY NEWS VIEWS & ANALYSIS
CICC expects Tencent’s Q2 adjusted net profit to slide 20% on year, lowers price target by 4%
COMPANY NEWS VIEWS & ANALYSIS

CICC expects Tencent’s Q2 adjusted net profit to slide 20% on year, lowers price target by 4%

 

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China International Capital Corporation (CICC) forecast Tencent Holdings’ revenue in the second quarter ended June 30 to drop by 3% year over year to 133.9 billion yuan, and the adjusted net profit to slide by 20% to 27.3 billion yuan, according to a note on Monday.

In terms of domestic games, the traffic of Honor Of Kings recovered in Q2 from the previous quarter, while that of Game for Peace remained meager due to the impact of the law to protect minors. Overall, Tencent is expected to post largely flat revenue year over year for domestic games in 2Q, it said.

Revenue from overseas games were also under slowdown pressure due to high base in the same period last year and epidemic control, it said.

The overall game revenue was foreseen to grow by 2% in Q2 from a year earlier to 43.7 billion yuan, the note said.

Tencent’s revenue from fintech and enterprise service business in Q2 is expected to grow by 3% on year to 43.1 billion yuan and its advertisement revenue is projected to slump by 26% on year to 16.8 billion yuan, according to the note.

Due to the impact of the Covid outbreaks and the macro environment, CICC lowered the forecast of Tencent’s annual revenue in 2022 and 2023 by 1% and 2%, respectively, to 572.1 billion yuan and 635.7 billion yuan. It also lowered the forecast of Tencent’s adjustment net profit in 2022 by 4% to 116.2 billion yuan, while maintains the forecast of Tencent adjustment net profit next year.

CICC maintains a Neutral rating for Tencent and lowered the stock price target by 4% to Hk$410. Tencent’s stock is trading 1.75 higher at HK$330.6 as of 1:30 pm local time.