Rating Quick Look | Tencent's target price slightly raised! JD.com, HKEX face "price cuts"
CICC International expects that Tencent's high marketing expenses in the fourth quarter of last year will not continue. The company will continue to maintain the trend of faster gross profit growth than revenue, and faster operating profit growth than gross profit. With the stable operation of old games in the second quarter and confirmed revenue in the first quarter, coupled with the launch of new games (Dungeon & Warriors), Tencent's game revenue growth rate will turn positive, showing a performance of starting low and ending high for the whole year
CICC: Maintains Tencent's "Buy" rating, raises target price from HKD 390 to HKD 395
According to Sensor Tower/Qimai Data, Tencent's mobile games have shown resilience in first-quarter revenue growth and are expected to continue to grow steadily this year. Domestic revenue increased by 11% year-on-year, with "Peacekeeper Elite"/"Honor of Kings" contributing over 60% of the revenue growth. Overseas revenue increased by 25% year-on-year, mainly driven by Supercell's flagship games.
The bank expects Tencent's first-quarter game revenue to decline by 2% year-on-year. Considering amortization, domestic mobile game revenue may still decline year-on-year; Supercell's revenue has been recovering since the third to fourth quarter of last year, with overseas game revenue expected to increase by 4% year-on-year. PC online games (client games) had a high base last year.
Additionally, the bank believes that Tencent's advertising business is the best in the industry, with Tencent Video's advertising inventory still to be improved. With the growth in user usage time, optimization of content recommendations, and improvement in advertising conversion rates, first-quarter advertising revenue is expected to increase by 20% year-on-year.
Macquarie: Maintains neutral rating on JD.com, lowers H-share target price from HKD 105 to HKD 103
The bank expects JD.com's first-quarter performance to meet expectations. It is expected that JD.com's retail revenue will increase by 6.2% year-on-year to RMB 257.9 billion. Considering the improved profitability of other non-core departments such as JD Logistics, it is expected that the adjusted operating profit of the group in the first quarter may reach RMB 8.7 billion, indicating a slight expansion of the adjusted operating profit margin by 10 basis points to 3.3%.
The report points out that JD.com is increasing its investment in its content ecosystem to enhance customer engagement and stickiness. The bank has slightly adjusted its profit expectations for JD.com, lowering the net profit forecast for the fiscal year 2024 and 2025 by 3% and 1% respectively.
Citi: Correspondingly lowers HKEX's target price from HKD 233 to HKD 215, rating "Sell"
The bank expects HKEX's attributable profit for the first quarter of fiscal year 2024 to increase by 8% quarter-on-quarter but decrease by 18% year-on-year. Total revenue for the same period is expected to decline by 10% year-on-year, mainly affected by weak average daily turnover (ADT) and slowing investment income. The bank also lowered its earnings per share forecast for fiscal years 2024 and 2025 by 1%, mainly due to increased operating expenses.
The bank also anticipates that HKEX's investment income for the first quarter of fiscal year 2024 will increase by 10% to HKD 1.2 billion quarter-on-quarter but decrease by 23% year-on-year. Due to the decline in stock market returns and the rise in bond yields, the bank expects the external investment portfolio income of HKEX to slow down in the quarter.
Additionally, the bank also expects the income from Hong Kong futures funds to remain relatively stable on a quarterly basis, mainly due to moderate improvements in net income rates, which may be offset by a slight narrowing of the fund size