Hong Kong Stock Concept Tracking | Tencent announced its third-quarter report today, institutions optimistic about the improvement in the gaming sector's prosperity (with related stocks)

Tencent will announce its third-quarter results on November 13, with market expectations for revenue of 167.93 billion yuan, a year-on-year increase of 8.6%, and a net profit of 45.33 billion yuan, a year-on-year increase of 25%. Key focus areas include game revenue and contributions from joint ventures, with game revenue expected to reach 51.4 billion yuan, a year-on-year increase of 12%. Online advertising is expected to grow by 16%, while financial technology and enterprise services are projected to grow by 3.9%. Guoyuan Securities predicts that the scale of China's gaming market will reach 91.766 billion yuan in the third quarter of 2024, with industry prosperity expected to improve. Related Hong Kong stocks include Tencent

There are two key points in Tencent's earnings expectations: first, game revenue, especially the progress of plans to reduce revenue sharing with Apple or Google platforms; second, the contribution from joint ventures.

The market expects game revenue to reach 51.4 billion yuan, a year-on-year increase of 12%. For the hit mobile game "Dungeon & Fighter: Origin" on the Android platform, it mainly uses its own channels. After one quarter, there will be an assessment of the impact on revenue from using its own channels instead of Google’s store, and whether there has been any progress in revenue-sharing negotiations on the Apple platform.

The growth rate of Tencent's quarterly revenue is expected to remain below 10%, but net profit or adjusted net profit is expected to grow at a higher rate, attributed to cost compression and profit sharing from joint ventures.

In its second-quarter results, Tencent indicated that the growth in this segment was mainly due to improved performance from several domestic joint ventures and some overseas game studios.

As for the other two revenue streams, the market expects Tencent's online advertising to grow by 16% to 29.76 billion yuan, while financial technology and enterprise services are expected to grow by 3.9% to 54 billion yuan.

Guoyuan Securities stated that in the third quarter of 2024, the scale of China's gaming market is expected to reach 91.766 billion yuan, with a quarter-on-quarter increase of 22.96% and a year-on-year increase of 8.95%. In October, 113 domestic game licenses and 15 imported game licenses were issued. New titles from major companies such as Kaiying Network's "Black Dragon Storm" and "Eternal Dragon Clan," Tencent's "Dragon Stone War," "Explosive Squad," "Lineage 2: Covenant," "Victory Goddess: Nikki," and Kuaishou's "Three Kingdoms: Looking at the World" have been approved, ensuring a continuous supply of licenses.

In terms of new game launches, Tencent's "Pokémon Unite" will go live on November 7, G-bits' agency game "Echo of the Anomaly" is scheduled for November 13, and Kuaishou's "Endless Dream Return" will launch on November 21. The supply of quality new games is expected to boost industry sentiment and drive the gaming market scale upward.

Related Hong Kong stocks in the gaming sector include:

Tencent Holdings (00700): Tencent's game revenue accounts for 30%, with an increasing share from overseas. International game revenue is part of Tencent's value-added services segment, which accounted for 49% of total revenue in 2023, with domestic games at 21% and international games at 9%. In terms of game revenue, Tencent's overseas game revenue reached 53.1 billion yuan in 2023, accounting for 30% of its gaming revenue. With its expansion overseas, Tencent's share of overseas game revenue has gradually increased, rising from 15% in 2019 to 30% in 2023. Attention should be paid to the launch and performance of titles such as "Delta Operation," "Kingdom of the Rock Mobile Game," "Honor of Kings World," and "Valorant Mobile Game."

NetEase-S (09999): "Yanyun Sixteen Sounds," "FragPunk," "Code: Infinite."

Xindong Company (02400): "Let's Go Muffin," "Xindong Town" have performed excellently, with further attention on expansion progress outside mainland China. "Iser" "Original Quality Test" will be held from October 24 to November 4 Bilibili-W (09626): "Three Kingdoms: Strategizing the World" long-term operation, continuing to invest in game business exploration.

Kingsoft (03888): (Xishanju) "Limit Breaker" attempts to enter the mech battle PC game field.

Bai Ao Family Interactive (02100): Solidifying core IP competitive advantages, continuously exploring AI technology to empower product development, accelerating international market layout