Main points of investment:
1. Major financial indicators: we expect Tencent 2021Q4 to achieve operating income of 142.015 billion yuan (YoY+6%,QoQ+0%), including 70.09 billion yuan for value-added services (YoY+5%,QoQ-7%), 21.645 billion yuan for online advertising business (YoY-12%,QoQ-4%), and 47.518 billion yuan for financial technology and corporate services (YoY+23%,QoQ+10%). It is estimated that the net profit of 2021Q4IFRS is 32.515 billion yuan (YoY-45%,QoQ-18%) and that of Non-IFRS is 25.477 billion yuan (YoY-23%,QoQ-20%). It is estimated that the net profit of IFRS in 2021 is 162.379 billion yuan (YoY+2%) and the net profit of Non-IFRS is 124.385 billion yuan (YoY+1%). (all are RMB monetary units)
2. Games: 2021Q4 is expected to grow by 5% compared with the same period last year, the performance of head products is stable, the performance of new games is outstanding, and a new overseas distribution brand Level Infinite is launched to accelerate the global layout of games.
3. Social network: 2021Q4 is expected to grow by 5% compared with the same period last year, with a rich reserve of high-quality TV series variety content, and the upgrade of video number function deeply connects Wechat Ecology. Tencent Music entered meta-universe and launched the first virtual music carnival TMELAND.
4. Advertising business: it is expected that 2021Q4 will continue to be under pressure due to the macro environment and budget cuts in some key industries, with a decline of 12.0% in the quarter compared with the same period last year. Social and other advertising revenue is expected to be 18.156 billion yuan, down 11% from the same period last year, while media advertising revenue is 3.489 billion yuan, down 18% from the same period last year.
5. Financial technology and enterprise services: 2021Q4 is expected to maintain steady growth, with a quarterly growth rate of 23% compared with the same period last year. The acceleration of payment interconnection is expected to bring new increments, and cloud business still maintains a high growth rate. Tencent Cloud's market share in audio and video solution track exceeds 30%, maintaining the first place for four years in a row.
For profit forecast and investment rating, we estimate that the company's FY21-23 revenue will be 5779max 6363, 734.4 billion yuan respectively, and the net profit returned to the mother will be 16241708max 188.5 billion yuan (NONIFRS caliber is 1244x157.2 billion yuan), corresponding to EPS 16791763max 19.42 yuan, corresponding to PE 22x21x19X respectively, according to SOTP valuation method. We give Tencent game business, digital content platform, social platform, financial technology business, cloud and enterprise services, and investment companies a total target market capitalization of RMB 4.86 trillion in 2022, corresponding to the target price of RMB505 / HK $620, maintaining a "buy" rating.
The risk indicates that the macroeconomic growth is less than expected, the industry market competition intensifies the risk, the policy content supervision risk, the user loss risk, the Internet valuation adjustment risk, the realization less than expected risk and so on.