Tencent Holdings Q3 Earnings Preview: Game Revenue Expected to Accelerate Growth, Healthy Growth in Video Account Traffic

Zhitong
2024.11.13 03:32
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Tencent will release its Q3 2024 results on November 13, with the market expecting accelerated growth in gaming revenue, resilient advertising revenue from video accounts, and financial technology and enterprise service revenue likely to improve with the recovery of the macro environment. According to the forecasts of 12 brokerages, the net profit for the third quarter under non-International Financial Reporting Standards is expected to be between RMB 51.341 billion and RMB 57 billion, an increase of 14.3% to 26.9% year-on-year. The overall gross margin is expected to be 53.3%, an increase of 3.9 percentage points year-on-year

According to Zhitong Finance APP, Tencent Holdings (00700) will release its Q3 2024 results on November 13. The market generally expects that the product cycle of the company's gaming business will drive accelerated short-term revenue growth in gaming, while the advertising from video accounts combined with inventory may support the resilience of mid-term advertising revenue growth. The revenue growth of financial technology and enterprise services is expected to gradually recover with the macro environment, and the incremental business with high gross margins lays a foundation for the continuous improvement of mid-term gross margins. Coupled with a relatively stable competitive landscape, cautious expense spending can be maintained, resulting in a relatively obvious profit growth capability.

Regarding overall performance, benefiting from the sustained growth of gaming and video account businesses and the expansion of gross margins, a comprehensive forecast from 12 brokerages suggests that Tencent's non-IFRS net profit for Q3 this year is expected to reach between RMB 51.341 billion and RMB 57 billion, compared to RMB 44.921 billion in the same period last year, representing a year-on-year increase of 14.3% to 26.9%, with a median of RMB 54.86 billion, a year-on-year increase of 22%.

Tianfeng Securities expects that the company's gaming revenue will continue to accelerate year-on-year in Q3, while the growth rate of advertising revenue may slightly decline but still maintain resilience, and the growth rate of financial technology and enterprise services revenue will slow down at a low level. It is expected that the company's overall gross profit will increase by 16% year-on-year in Q3 2024; the overall gross margin will be 53.3%, an increase of 3.9 percentage points year-on-year, remaining basically flat quarter-on-quarter. In addition, it is expected that the company's overall expenses will continue to be prudently controlled, with core operating profit growth outpacing gross profit growth. The Non-IFRS net profit attributable to the parent company is expected to be approximately RMB 57.4 billion in Q3 2024, a year-on-year increase of 28%.

Huatai Hong Kong believes that Tencent Holdings is expected to achieve a year-on-year revenue growth of 9.3% in Q3 2024, facing short-term growth slowdown. The growth of online advertising revenue is expected to slow to 16%, with a slight decline in total revenue from DNF Mobile after September. In the long term, the potential launches of HoK World and HoK Breaking Dawn in 2025 will become key catalysts, with expected monthly total revenue of approximately RMB 1.5 billion to 2.5 billion. The increase in advertising load for video accounts, along with integration with Taobao, Tmall, and WeChat Pay, is expected to drive a compound annual growth rate increase of 3-4% in online advertising and commercial payment revenue from 2025 to 2026.

Guohai Securities expects Tencent Holdings to achieve operating revenue of RMB 167 billion in Q3 2024, a year-on-year increase of 8%. Value-added services, gaming business, social networks, online advertising business, and financial technology and enterprise services all achieved growth. The gross margin is expected to increase to 53%, with gross profit growing by 16% year-on-year. NON-IFRS operating profit and net profit attributable to the parent company are expected to grow by 18% and 25% year-on-year, respectively, with improvements in operating profit margin and net profit margin.

In terms of gaming business, Tianfeng Securities expects that domestic and overseas gaming revenue will continue to accelerate year-on-year, with the company's online gaming revenue expected to increase by 13% year-on-year in Q3 2024, including a 12% increase in the domestic market and a 15% increase in the overseas market.

For domestic games, "Dungeon & Fighter: Origin," which was launched on May 21, ranked in the TOP 2-4 range of the iOS game bestseller list in Q3, with a relatively good revenue curve. Considering the revenue deferral recognition rules, Tianfeng Securities expects that the revenue increment contribution from "Dungeon & Fighter: Origin" in Q3 may be more significantFor overseas games, considering that the ranking of "Brawl Stars" in the iOS best-seller list in major overseas markets in the third quarter has not changed much compared to the second quarter, Tianfeng Securities expects that the revenue from overseas games will continue to maintain a high year-on-year growth in the third quarter, with an accelerating trend in year-on-year revenue growth continuing.

Looking ahead, Tianfeng Securities expects that the revenue growth of Tencent's gaming business in the fourth quarter will continue to accelerate on a quarter-on-quarter basis, with ongoing attention to the scheduling of reserve products such as "Pokémon Unite," "Dawn of the Stars," "Counter-Strike: Future," "Final Fantasy XIV: Crystal World," "One Piece: Strong World," and "Valorant Mobile."

In terms of financial technology and enterprise services, Tianfeng Securities expects Tencent's financial technology and enterprise services revenue in Q3 2024 to grow by 2% year-on-year, with a continued decline in growth rate compared to Q2 2024. It is anticipated that the growth of financial technology service revenue will continue to slow down in the short term. The company's gross margin for financial technology and enterprise services has continuously improved from 27.1% in Q4 2021 to 47.6% in Q2 2024, driven by the recovery of operational leverage due to macro demand recovery, the restructuring of cloud business leading to margin improvement, and the rapid development of technical service fees for video account sales.

According to Bloomberg's consensus expectations, the financial technology and enterprise services business is expected to generate revenue of 54.055 billion yuan, a year-on-year increase of 3.86%. In terms of segmentation, the growth rate of payment business has slowed year-on-year compared to the first half of the year due to macro and consumption impacts. The integration of Taobao with WeChat Pay is expected to bring incremental payment revenue, and gross margins are expected to improve, while wealth management and other businesses maintain healthy growth.

Huatai Hong Kong expects Tencent's online advertising and financial technology revenue to grow by 16.4% and 4.0% year-on-year, respectively, in the third quarter. The integration of WeChat Pay with Taobao and Tmall is expected to attract more users from lower-tier cities, potentially bringing Tencent an annual WeChat commission revenue of 400-800 million yuan

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