Rating Quick Look | Tencent's performance is highly regarded ahead of time! Kuaishou "Buy", Roblox faces "price cuts"
TF Securities believes that the market has relatively sufficient expectations for Tencent's flat revenue growth in the first quarter. It is expected that the growth of the gaming business will enter a recovery track starting from the second quarter, driving the revenue growth rate to rise. In addition, the continuous improvement of revenue structure will enhance the gross profit margin, laying a relatively solid foundation for continuous profit growth
TF Securities: Maintains "Buy" rating on Tencent Holdings with a target price of HKD 476
The firm believes that the market has relatively sufficient expectations for the flat revenue growth of the company in 1Q2024. The firm expects the growth of the gaming business to enter a recovery track from 2Q2024 onwards, driving the revenue growth rate to rebound. In addition, continuous improvement in revenue structure is expected to enhance gross profit margin, providing a relatively solid foundation for continuous profit growth.
In the medium to long term, the company is actively deploying AI technology development, and its diversified product matrix corresponds to a broad potential application direction. Technological progress may become an important growth multiplier in the medium to long term.
Looking ahead, several favorable factors are expected to drive the rebound in Tencent's game growth rate. The firm expects the network game growth rate to recover to around 5% in 2Q2024, and to around 8% in 2H2024, with both domestic and overseas game revenue growth rates expected to rise.
-
Recovery in long-term product growth, partly due to the decline in year-on-year base numbers for domestic long-term products, and the strong operational performance of "Brawl Stars".
-
The heavyweight new game "Dungeon & Warrior: Origin" will go live on May 21, with the firm having relatively optimistic expectations for its revenue volume. Supercell's new game "Squadbusters" will go global on May 29, with pre-registrations exceeding 20 million as of May 2, and it has already soft-launched in regions such as Canada, Denmark, and Norway. In addition, new games like "Dawn of Stars" and "Need for Speed: Assembly" are also expected to go live in the summer.
Credit Suisse: Maintains "Buy" rating on Kuaishou-W with a target price of HKD 83
The firm expects Kuaishou's first-quarter performance to be robust, with total revenue expected to grow by 15% year-on-year to RMB 29 billion, and adjusted EBIT to reach RMB 3.6 billion, compared to only RMB 200 million in the same period last year. E-commerce business remains the main growth engine, with the firm expecting a strong year-on-year growth of 29%, driving a 40% year-on-year growth in e-commerce advertising and commissions.
The report points out that with the increase in short video ad inventory, as well as the expansion of mini-games and offline ad coverage, external advertising may continue to maintain double-digit growth. Domestic EBIT may reach RMB 3.9 billion, with a profit margin of 14%, while overseas losses may further narrow to RMB 400 million. The firm expects Kuaishou's full-year profit margin to grow by 70% year-on-year.
Goldman Sachs: Gives HKEX a target price of HKD 330
The report cited Bloomberg as reporting that the China Securities Regulatory Commission and the State Administration of Taxation are reviewing a plan submitted by Hong Kong to exempt Stock Connect dividends from a 20% capital gains tax. Driven by the news, HKEX's stock price rose by 7% last Friday.
While the firm does not express an opinion on the outcome, it presents an upside scenario, suggesting that if the proposal is implemented, the trading volume of the Southbound Stock Connect may increase. The firm notes that Southbound Stock Connect investors prefer stocks with high dividend yields.
Goldman Sachs expects that the average daily turnover of stock trading in the 2024 fiscal year will stabilize, with an average compound annual growth rate of about 12% from 2024 to 2026, as trading volume reaches a turning point and returns to its original growth trajectory. As market valuations trend upwards, it may drive the number of IPOs, thereby aiding market trading volume and HKEX stock price
Daiwa: Maintains "Hold" rating on SMIC with a target price of HKD 16
The report states that the company recorded a net loss of USD 26 million in the first quarter of 2024, significantly lower than the expected net profit of USD 88 million and USD 73 million by the bank and the market, respectively. This was mainly due to non-operating fluctuations, including reduced government subsidies putting pressure on operating expenses, dilution of gross profit margin due to improved operating income, investment losses from joint ventures and associates, and losses from cash flow hedging.
The bank pointed out that due to the high depreciation factors related to SMIC's active capital expenditures, the company's gross margin guidance is lower than the bank's and Wall Street's earlier forecasts of 12% to 14%, raising concerns about SMIC sacrificing company profits in the price war to improve sales performance.
UBS: Raises Pinduoduo's target price to HKD 48
UBS believes that potential stock price catalysts for Pinduoduo include accelerating store expansion in the United States, Thailand, and other ASEAN countries, launching Pinduoduo mobile games, and introducing new product categories or intellectual property (IP).
The report expects overseas expansion to become Pinduoduo's second growth engine, bullish on the company's ability to monetize its IP, omnichannel strategy, and enhance supply chain productivity. In overseas markets, UBS believes Pinduoduo can leverage social media through collaborations with celebrities and KOLs to attract young consumers.
According to related data, driven by consumer recovery and overseas expansion, Pinduoduo has achieved overall performance growth. Pinduoduo's stock price has risen by over 80% from the beginning of the year, more than doubling from its lowest point in February.