Preview | Can TENCENT's market value reach HKD 4 trillion? Can games, advertising, and financial technology continue to grow?
Guohai Securities expects TENCENT's game revenue to increase by 9% YoY in the second quarter, advertising revenue to increase by 23% YoY, and financial technology business revenue to increase by 19% YoY. Among them, the recovery of macro demand, the peak season of e-commerce, and the structured increment of video accounts have brought growth opportunities to TENCENT's advertising business!
The curtain has been raised on the US stock earnings season, and the Hong Kong stock interim report will soon follow.
Among them, TENCENT, the "king of stocks" in the Hong Kong stock market and a leading player in the gaming industry, will announce its performance on August 16.
Guohai Securities is the first to predict that TENCENT's second-quarter operating revenue will reach 149.9 billion yuan, a year-on-year increase of 12%; its non-IFRS net profit attributable to shareholders will reach 36 billion yuan, a year-on-year increase of 28% and a quarter-on-quarter increase of 11%; its gross profit margin will be 44%, its non-IFRS operating profit margin will be 27%, and its non-IFRS net profit margin will be 24%.
The bank also gives a target market value of 3.93 trillion yuan for TENCENT's six major sectors in 2023, including gaming, digital content platforms, social platforms, financial technology, cloud and enterprise services, and investment companies. This corresponds to a target price of HK$447 and a "buy" rating.
Based on the latest price, this price implies a 33% upside potential!
Subsidiary Business Expectations
- Gaming
It is expected to grow by 9% year-on-year in the second quarter of 2023. TENCENT's core domestic games have performed steadily, with leading games such as Honor of Kings and Peace Elite continuing to dominate the market. The launch of multiple new games in the second quarter and summer season will contribute to incremental growth. The overseas expansion strategy continues to advance, with a reserve of multiple globally recognized IP products. It is expected that the proportion of overseas revenue will steadily increase in the long term.
- Social Networking
It is expected to grow by 2% year-on-year in the second quarter. TENCENT's video dramas and variety shows maintain high quality, receiving positive feedback from the market. Cooperation with TikTok Group promotes a win-win situation in the long and short video industry. The commercialization of video accounts accelerates, with significant increases in user activity and content creation. TENCENT Music explores large-scale language models to improve music creation efficiency and releases the music social product "WeBand".
- Advertising Business
It is expected to grow by 23% year-on-year in the second quarter. The recovery of macroeconomic demand, the peak season for e-commerce, and the structured growth of video accounts provide growth opportunities for TENCENT's advertising business. The application of the hybrid model in TENCENT's advertising delivery system is expected to improve recommendation accuracy and conversion rate.
- Financial Technology and Enterprise Services
It is expected to grow by 19% year-on-year in the second quarter. The financial technology business is gradually recovering with the continuous rebound of consumer spending. The payment business is expected to maintain double-digit growth, and the regulation of Internet finance by Ant Group has entered a normalized stage.
TENCENT Cloud has launched large-scale industry models for the first time, and TENCENT Cloud MaaS has created a one-stop shop for industry models, covering multiple industry scenarios. It is expected to become a new growth driver for TENCENT's ToB business.