20230718-招银国际-腾讯控股-00700.HK-2Q23_preview__expecting_strong_recovery_ahead_8页_1mb

Tencent (700 HK) Q2 2023 Earnings Preview Summary

Analyst Recommendation

• Maintained BUY rating with no change from previous target price.

Key Financial Expectations

• Expected total revenue for Q2 2023: 12% year-over-year (YoY) growth to RMB149.9 billion.
• Projected non-IFRS net income: 25% YoY increase to RMB35.2 billion, with net profit margin (NPM) rising by 2.5 percentage points (ppt) YoY to 23.5%.

Growth Drivers

• Robust recovery in the advertisements and financial services (fintech) sectors.
• Improvements in operating leverage, driven by efficiency gains and expense optimization.
• Strengthening consumer internet revenue, with games and online advertising showing significant contributions.

Catalysts for Business Growth

• Anticipation of solid consumer internet revenue growth, enabling further operating leverage.
• Deployment of AI solutions via MaaS (Mobility as a Service) to capture enterprise demand for model training and applications, acting as growth multipliers.
• Normalizing fintech regulations post-infrastructure fines, supporting long-term health in the sector.

Valuation

• Target Price (TP): HK$455.0, representing a 29% upside from the current price of HK$352.60.
• Sensitivity Analysis: Forecasts maintained with slight adjustments in revenue and earnings estimates for FY2023-2025.
• SOTP Valuation Breakdown:
  • Online Games: HK$186.1 per share (20x 2023E PE, traded at discount to peers).
  • Social Network Services (SNS): HK$28.6 per share, including Tencent Music and other holdings.
  • Online Advertising: HK$47.7 per share (18x 2023E PE, reflecting mature phase entry).
  • Fintech: HK$99.2 per share (5.0x 2023E PS, premium due to China's digital payment recovery).
  • Cloud Business: HK$21.7 per share (5.0x 2023E PS, discount due to lower-margin IaaS focus).
  • Strategic Investments: HK$60.3 per share, with discount applied for equity holdings.

Financial Highlights

• Revenue growth trajectory: 11% in Q1 2023, expected further acceleration in Q2.
• Gross margin: Projected at 44.7% for Q2 2023, strengthening due to higher-margin segments.
• Peer comparisons: Positive positioning against gaming and advertising sector peers.

Disclosures

• Analyst certification confirms independence and adherence to Hong Kong securities regulations.
• Standard disclaimers on market risks, uncertainties, and reliance on economic factors.
• Note: Investment is subject to fluctuations; past performance not indicative of future results.