According to a research report published by CICC, Tencent (00700) expects revenue for the fourth quarter of last year to be 69.8 billion yuan, up 59% year on year, 1.8% higher than other brokers' forecasts; non-GAAP net profit rose 38% year on year to 17 billion yuan, which is also slightly higher than other brokers' forecasts.

According to the bank, it is expected that online advertising revenue will maintain strong momentum in the fourth quarter, mainly driven by advertising revenue from the “circle of friends”, while Tencent News's revenue is less than 5 billion yuan. Due to the flat number of daily active users and the suspension of platforms that sell “Smart Connect,” it is currently being replaced by “Broadpoint Connect,” but last year's weakness provided a low base opportunity for this year. It is expected that online advertising in the fourth quarter of last year and 16% of total revenue this year will contribute 17% and 16%, respectively.

Furthermore, the bank believes that the mobile game business will recover this year. Among them, Wang Zhe Rongyao still has a huge customer base, and the average monthly revenue per user has increased due to increased monetization capabilities; QQ Speed is growing rapidly, providing an outstanding contribution to revenue; in addition, a series of new games will be launched soon.

The bank said that the company plans to further enrich the WeChat ecosystem, such as adding a mini-program. It believes there will be no monetization this year, but as the scale expands and momentum increases, it will boost stock price performance. The target price is 540 yuan, and maintain the “buy” rating.