The Zhitong Finance App learned that BOC International released a research report saying that maintaining the Tencent (00700) “buy” rating, it is expected that high marketing expenses will not continue in the fourth quarter of last year. The company will continue to maintain the trend of gross profit growing faster than revenue and operating profit growing faster than gross profit, increasing operating profit by 8%/6% in 2024/25. The target price was raised from HK$390 to HK$395. The bank expects that in the second quarter, with the steady operation of old games and confirmed revenue in the first quarter, plus the launch of new games (Dungeons and Warriors), the growth rate of Tencent's game revenue will improve, and the performance for the whole year will be low and high.
The main views of JBC International are as follows:
Recent local mobile game sales update: sales in the first quarter increased 11% year over year
(SensorTower/Seven Mic) “Battle of the Golden Shovel”/“Wang Zhe Rongyao” was driven by the launch of the new version/new season, contributing 60% + in turnover. The new tour “Yuanmeng Star” contributed an increase of 500 million yuan. In March, the monthly turnover dropped to 100 million yuan. The performance was weaker than the bank's previous expectations. The flagship game “Wang Zhe Rongyao”/“Peace Elite” had a year-on-year turnover of +6%/-17%, and will gradually return to stability after commercial operation strategy adjustments.
Overseas mobile game release update: Supercell's performance is excellent.
Sales increased 25% year over year, mainly driven by Supercell's flagship game. Among them, “Wilderness Brawl” benefited from business model restructuring (optimization of BattlePass, etc.) and the addition of new gameplay methods to improve the user experience. In the first quarter, sales volume increased fourfold year-on-year, and monthly turnover reached a record high of 580 million yuan in March. “Goddess of Victory: NIKKE”'s first-quarter turnover declined slightly from last year's high base, but it began to recover in March, +40% compared to February.
Game revenue for the first quarter is estimated to drop 2% year over year
Mainly due to 1) based on the above revenue data, local mobile game revenue may still have declined year on year; Supercell sales began recovering in the 3-4 quarter of last year and is gradually reflected in revenue, which is expected to increase 4% year on year; 2) Mobile games had a high base last year, and Nexon guided game revenue in China to drop 35-44% year on year. Judging from the popularity of March, “DNF”'s thermal value was -37% year-on-year. “LoL” remained flat year on year, and “Fearless Contract” increased 60% + 60% from the first month of launch.
Tencent's advertising business performs best in the industry:
Compared to the industry, Tencent's video ad inventory is still increasing. With the increase in the usage time of video account users, as well as the increase in content recommendation optimization and ad conversion rates with technical support, advertising revenue is expected to increase 20% year-on-year in the first quarter.