Source: Finance Association

This Monday,$TENCENT (00700.HK)$It was officially announced that the mobile game “Dungeons and Warriors: Origins” will be officially launched on May 21, 2024.

Although the launch of this mobile game has been delayed for four years, it still went live earlier than generally anticipated by the market. Most Wall Street analysts expect “Dungeons and Warriors: Origins” (“DNF Mobile Game”) to reignite the growth momentum of Tencent's gaming business.

As a result, this news led Tencent's stock price to rise more than 6% on Monday, and eventually closed up 5.46% to HK$320.400, the biggest one-day increase since July last year.

A new dawn for Tencent's gaming business

In fact, over the past few quarters, Tencent's game business has been under constant concern from the outside world. On March 20 this year, the latest financial report released by Tencent showed that Tencent's game business revenue in 2023 reached 179.9 billion yuan, an increase of only 5% over the previous year; while the local market's game revenue was 126.7 billion yuan, an increase of only 2% over the previous year, not as much as 128.8 billion yuan in 2021. In the fourth quarter of last year, Tencent's local game revenue fell 3% year over year.

Tencent's earnings report for the first quarter of this year will be released on May 14. However, Citi expects Tencent's domestic game revenue to drop 6% year over year in the first quarter due to the lack of bright new games during this period.

As the world's largest game publisher, Tencent urgently needs a new game title to boost its sluggish game business. And the “Dungeons and Warriors: Origins” mobile game is probably Tencent's biggest dawn.

“Dungeons and Warriors: Origins” is a mobile game adapted from the best-selling computer game “Dungeons and Warriors (DnF)”. The computer game was developed by Nexon in South Korea and is one of the highest-grossing video games in history.

In February of this year, HSBC analysts said they expected the mobile game to bring Tencent RMB 11 billion in revenue this year because the game already had more than 50 million pre-registered users in China at the time.

Citi analyst Alicia Yap said that the game was released earlier than expected, and the market will see it as a positive driving force for Tencent's game revenue growth in the second quarter and beyond. Citi's rating of Tencent is a buy, and the target price is HK$459.

Is DNF bound to be popular in the country?

Analysts at Morgan Stanley pointed out that the first quarter of this year is expected to be a low point in Tencent's local game business, and the DNF mobile game to be launched in the second quarter will be a turning point.

Last month, Tencent conducted a closed beta with 300,000 players. A Tencent executive previously revealed during the earnings call that the DNF mobile game closed beta is going well, and internal release plans have been accelerated.

HSBC wrote in this month's report: “The DNF mobile game test achieved stable results in indicators such as Japanese users, retention rates, and user payment tendencies.”

Investment bank Jefferies (Jefferies) predicted in a February report this year that the game will “secure the top five” revenue rankings in China, but the bank expects that in the early stages of the game's launch, Tencent will adopt a “cautious approach to attract users and monetize”.

Jefferies analyst Thomas Chong predicts that Tencent's game revenue is expected to improve in the second quarter of this year. He predicted that DNF mobile games may generate revenue of RMB 6 billion per year, and that “in addition to DNF mobile games, Tencent also has many new businesses that can drive future growth.”

editor/tolk