The Zhitong Finance App learned that Huachuang Securities released a research report stating that Tencent (00700) was given the 2024 NON-IFRS net profit target PE 20x, corresponding to the target price of HK$464.88, maintaining the “recommended” rating for the company. Optimistic about Takov-like gameplay, “Peace Elite” may iterate or inject new life through operational restructure+gameplay. Every time a new gameplay paradigm is established, it has opened up market space (for example, the 17-year chicken game re-created a shooting market, and subsequent iterations have further expanded the market space). The bank believes that Tarkov may be a new mobile problem-solving idea, which is expected to expand the DAU space.

The main views of Huacheng Securities are as follows:

Supercell may enter the next expansion cycle, and large DAU operating endowments will empower global quality R&D capabilities; “Wilderness Brawl” has completed its counterattack. As the world's leading mobile game company, Supercell contributes about a quarter of Tencent's overseas game revenue. There are two notable characteristics in terms of operation: few officially launched products and a small number of team members. Since the launch of “Wilderness Brawl” at the end of 2018, the product has not been officially released for nearly 6 years, so revenue continues to fluctuate. At this point, two changes have been observed, and it is believed that Supercell may be expected to move from a volatile state to the next expansion cycle:

According to estimates, “Brawl in the Wild” is expected to drive Supercell turnover +105% and revenue +55% in revenue in '24, and the quarterly growth rate is expected to gradually increase. Since its launch at the end of 2018, the distribution of “Wild Battle” has been declining with normal fluctuations in the life cycle. Since 2022, Supercell has begun to expand the size of the operation team to enhance the weak operating capabilities of small teams, superimposing Tencent's big DAU game operation capabilities. In 2023, “Brawl in the Wild” reworked the game's random mechanism, simplified and increased the frequency of daily activities, driving a month-on-month increase in turnover since the end of December, and reached a record high since launch. Based on relatively conservative estimates, regardless of new products, SuperCell's turnover is expected to increase YOY +105% to 26.3 billion yuan in 24 years, and revenue is expected to increase YOY +55% to 19.8 billion yuan; and due to the effects of the deferral cycle, the revenue growth rate is expected to continue to accelerate in the following quarters. The bank estimates that the revenue growth rate for the next four quarters will be 43%/74%/103%/94%. Furthermore, Supercell's incremental revenue contributed 4% to Tencent Gaming as a whole.

This is the first new product after almost 6 years of launch. Supercell launched “Squad Busters (Burst Squad)” in overseas markets on May 29 — the first officially released product after a lapse of nearly 6 years. Supercell pursues the product concept of “cutting off all non-outstanding products”. Although it has only launched 5 official products before, it cut out products under research and testing in more than 30 pipelines during the same period. It was first launched on April 23 in 8 countries including Canada and Finland, and all topped the free list.

Optimistic about Takov-like gameplay, “Peace Elite” may iterate or inject new life through operational restructure+gameplay. The bank discovered that “Peace Elite” may be adjusted in the commercial version and will update the “Metro Royale (Metro Royale)” gameplay during the summer. This model has contributed positively to the steady flow of overseas versions. Subway Escape is a “takov-like” gameplay. It places more emphasis on the fun of “collecting”, adapts to mobile devices, and is optimistic that it will revitalize the basic accounts of existing users and drive traffic growth.

The iteration of shooter games, from the small map competition representing hardcore shooting in the CS series, to the hero shooting represented by Overwatch, to the battle royale represented by PUBG, to the heroic battle royale represented by APEX/Eternity, to escaping from the battlefield+external numerical growth represented by Tarkov, each establishment of a new gameplay paradigm has opened up market space (for example, 17 years of chicken eating gameplay recreated a shooting market, and subsequent iterations have further expanded the market space). The bank believes that Tarkov may be the new mobile problem solving method, which is expected to expand the market space. DAU space.

Investment advice: Due to the higher-than-expected performance of “DNFM” and “Wild Brawl”, we raised the company's 24-26 revenue forecast to 6741/7377/796.2 billion yuan (the original forecast was 6740/7331/785.4 billion yuan), YOY +11%/9%/8%; net profit from the NON-IFRS scale to 1993/2203/239.3 billion yuan (the original forecast was 1992/2191/236.4 billion yuan), YOY +26%/11%/. The company was given the 2024 NON-IFRS net profit target PE 20x, corresponding to the target price of HK$464.88, maintaining the “recommended” rating for the company. (Exchange rate is 0.91 RMB/HKD)

Risk warning: Product launch progress or performance falls short of expectations; macroeconomic fluctuations; industry competition intensifies; the delay cycle is greater than 12 months.