20240715-招银国际-腾讯控股-00700.HK-Earnings_growth_stability_continues_8页_1mb

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This report is a company update issued by CMB International Global Markets. Tencent (700 HK) is expected to maintain stable earnings growth, supported by a recovering games business and solid ad performance. For the 2Q24E, non-IFRS net income is projected to grow by 33% YoY to RMB49.2 billion.

The report highlights DnF Mobile's performance, which has ranked among the top two in China's iOS grossing chart since its launch, contributing to games revenue growth. Despite the long deferral period of DnF Mobile and other titles, the company is more positive on the games business for the 2H24E, expecting a 12% YoY growth in games revenue.

The ad business remains resilient due to strong Weixin ad performance, while the fintech business faces pressure from macro uncertainty.

Tencent is expected to expand its gross profit margin to 53.4% in 2Q24E, with a 5.9ppt YoY increase. The company maintains a target price of HK$480, with a 20.9% upside from the current price.

The BUY rating reflects confidence in Tencent's 26% YoY earnings growth and its commitment to shareholder returns, including a potential HK$100 billion share buyback. The valuation of 15x FY24E PE is deemed attractive by the analysts.