20211101-招银国际-腾讯控股-00700.HK-Moving_into_4Q21E_games_rebound_4页_795kb

CMB International Securities | Equity Research | Company Update Summary: Tencent (700 HK)

Core Content

This report provides an equity research update on Tencent (700 HK), focusing on its financial performance, business segments, and market outlook for the 3Q21E and beyond. It also includes key financial metrics, shareholding structure, and CMBIS's investment rating.

Main Points

3Q21E Performance

• Revenue: Expected to be RMB143.7 billion, up 15% YoY, 2% below consensus.
• Non-GAAP Net Profit: Grew 0% YoY, in line with consensus.
• Segment Growth:
  • VAS: +6% YoY
  • Ads: +13% YoY
  • FBS: +32% YoY

4Q21E Outlook

• Games Rebound: Expected to see a rebound in 4Q21E, with strong performance from League of Legends: Mobile (LoLM).
• LoLM Performance: Ranked TOP2 in iOS grossing, with a first monthly grossing of RMB1.0-1.5 billion.
• Games Revenue Growth: Forecasted to grow 9% YoY in 4Q21E, compared to 5% in 3Q21E.

Sector Outlook

• Regulation Overhang: Sector regulation is expected to gradually ease, allowing the market to focus on fundamentals.
• Catalysts: Upcoming game licenses resumption and improved 4Q21E game performance are seen as key catalysts for re-rating.

Investment Rating

• Maintain BUY: CMBIS maintains a "BUY" rating with a target price of HK$640 (31x FY22E P/E).
• Price Performance: Current price is HK$485.0, with a 32% upside to the target price.

Key Financials

Revenue

• FY19A to FY23E: Projected to grow from RMB377.289 billion to RMB823.638 billion.
• YoY Growth: Expected to remain in the range of 15–20% over the forecast period.

Net Profit

• FY19A to FY23E: Projected to increase from RMB94.351 billion to RMB192.369 billion.
• Adj. Net Profit: Expected to grow from RMB94.351 billion to RMB192.369 billion.

Earnings Per Share (EPS)

• Adj. EPS: Projected to rise from RMB9.7 to RMB20.0.

Profit Margins

• Gross Margin: Expected to remain stable around 44%.
• Operating Margin: Projected to decline slightly to 30.4% in FY22E.
• Adj. Net Margin: Expected to decrease to 22.5% in FY22E.

Shareholding and Market Data

Shareholding Structure

• Naspers: 28.9%
• Ma Huateng: 7.4%
• Vanguard: 2.5%

Stock Data

• Market Cap: HK$4,684,892 million
• Average 3-Month Turnover: HK$15,355.69 million
• 52-Week High/Low: HK$775.50 / HK$412.20

Share Performance

• 1-Month Return: 4.8% (Absolute), -1.0% (Relative)
• 3-Month Return: 9.2% (Absolute), 6.9% (Relative)
• 6-Month Return: -22.1% (Absolute), -12.0% (Relative)

Financial Summary

Income Statement

• Revenue: FY21E: RMB571,629 million, FY22E: RMB688,289 million
• Net Profit: FY21E: RMB129,627 million, FY22E: RMB160,650 million
• Adj. Net Profit: FY21E: RMB129,627 million, FY22E: RMB160,650 million
• Adj. EPS: FY21E: RMB13.5, FY22E: RMB16.7, FY23E: RMB20.0

Balance Sheet

• Total Net Assets: Expected to grow from RMB488,824 million in FY19A to RMB1,170,240 million in FY23E.
• Shareholders' Equity: Projected to increase from RMB432,706 million to RMB1,058,849 million.

Cash Flow

• Operating CF: Expected to rise from RMB148,590 million in FY19A to RMB310,127 million in FY23E.
• Net Change in Cash: Projected to increase from RMB34,092 million to RMB135,963 million.

Key Ratios

Sales Mix

• VAS: 51.0% (FY21E), 48.5% (FY22E), 46.4% (FY23E)
• Ads: 17.0% (FY21E), 17.0% (FY22E), 16.7% (FY23E)
• Others: 32.1% (FY21E), 34.6% (FY22E), 36.9% (FY23E)

Profitability Ratios

• Operating Margin: 30.7% (FY21E), 30.4% (FY22E), 29.6% (FY23E)
• Pre-tax Margin: 29.7% (FY21E), 29.8% (FY22E), 29.2% (FY23E)
• Adj. Net Margin: 22.7% (FY21E), 23.3% (FY22E), 23.4% (FY23E)

Returns

• ROE: Projected to decrease from 23.9% (FY19A) to 17.4% (FY21E), then rise to 17.4% (FY23E).
• ROA: Expected to decrease from 10.7% (FY19A) to 9.2% (FY21E), then increase to 9.1% (FY23E).

CMBIS Ratings

• BUY: Indicates potential return of over 15% over the next 12 months.
• HOLD: Indicates potential return of +15% to -10% over the next 12 months.
• OUTPERFORM: Industry is expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry is expected to perform in-line with the relevant broad market benchmark.

Important Disclosures

• The report is not an offer or solicitation to buy/sell any securities.
• CMBIS may have conflicts of interest due to investment banking relationships.
• The report is for the use of intended recipients only and must not be reproduced without consent.
• CMBIS is not a registered broker-dealer in the U.S. or Singapore, and the report may be subject to local regulations.