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<Research>CMS Adds TENCENT (00700.HK) TP to $470; Stable Margin Expansion Trend Supports Bright Outlook
Recommend 40 Positive 58 Negative 23 |
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China Merchants Securities remarked in a report that TENCENT (00700.HK)'s 1Q24 revenue rose 6% YoY, in line with expectations, driven by a 26% YoY increase in advertising revenue, a flat YoY increase in gaming, and a 9% rise in fintech and other businesses. The group's gross profit margin improved significantly by 7.1 ppts YoY to 53%, with gross profit margins across all business segments increasing. The improvement in gross margin drove non-IFRS operating profit and net profit up 30% and 54% YoY, respectively, exceeding market expectations of 28% and 17%. CMS mentioned that TENCENT had previously declared a cash dividend of $3.4 per share and planned to increase its buyback amount to $100 billion by 2024, with a potential rate of return of around 3.66%. The management said that despite the favourable share price performance, it will continue to make buybacks as the company remained bullish on the group's fundamentals and valuation. TENCENT management also said the company has no plans to pay out its investment interests in the form of dividends. The broker considered this a positive impact on BILIBILI-W (09626.HK) (BILI.US), KUAISHOU-W (01024.HK) and PDD (PDD.US). CMS broadly maintained its revenue forecast for TENCENT during FY24-FY26, but raised its non-IFRS net profit forecast by 6-9% to reflect the expected further improvement in profit margins. The broker also hiked its target price on the group from $393 to $470, with an Overweight rating. AAStocks Financial News |
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