Nomura expects Tencent Holdings (00700)'s non-GAAP net profit for the first quarter of fiscal year 2024 to increase 33% year over year.
The Zhitong Finance App learned that Nomura released a research report stating that it maintains the “buy” rating of Tencent Holdings (00700). The forecast for the 2024 fiscal year remains unchanged, and the target price is HK$400. The bank noticed that Tencent is speeding up share repurchases this year. Stock repurchases in recent weeks account for more than 10% of the company's daily stock trading volume. The bank believes that the above active repurchase actions echo the company's management's earlier stated promise to return more returns to shareholders.
The bank expects Tencent Holdings' non-GAAP net profit for the first quarter of fiscal year 2024 to increase 33% year over year. Due to the weak performance of the online game business, revenue will continue to grow 6% year over year. The bank believes that due to Tencent's high base effect a year ago, the company's online game revenue for the first quarter of fiscal year 2024 may drop 4% year on year, while domestic game revenue will drop 6% year on year.
Furthermore, it is believed that Tencent's international gaming business may show a 2% year-on-year increase. The company's online advertising revenue may have increased 19% over the same period last year, and it is estimated that video account ads may account for 13% of this. Thanks to an increase in revenue share from high-margin businesses such as video account ads, Tencent's gross margin may continue to expand. Gross margin is expected to increase by 3 percentage points to 49% year over year, supporting the company's steady profit growth of 33%.
According to the report, the second quarter of this year was a busy time for the Chinese game industry. Tencent and NetEase will launch a variety of blockbuster games in the second season and summer of this year. The bank believes that the above two companies may increase marketing expenses before and after the new game is released to improve the success rate. Advertisers such as Weibo-SW (09898), Bilibili-W (09626), and Douyin are also expected to profit from it.