King's Financial News | Bocom Intl releases Tencent (00700) 3rd quarter performance outlook, expecting a 11% year-on-year increase in game revenue, basically in line with previous expectations. Among them, local/overseas mobile game revenue in the third quarter may increase by 15%/18% year-on-year, driven by "MDnF"/"Wild Rift"; the decline in PC game revenue may narrow to 1%, considering the rising popularity of "Fearless Agreement" or partially offsetting the impact of the high base number of "DnF".

The bank slightly lowered Tencent's third-quarter advertising revenue growth rate to 16%, mainly due to: 1) adjustments in advertising budgets by advertisers; 2) Tencent Video's content popularity falling short of previous expectations. In addition, it is expected that third-quarter payment business revenue will increase by 1% year-on-year, basically in line with the second quarter growth rate, with Taobao incremental contributions gradually increasing. The cloud business will continue to balance healthy growth in revenue and gross profit.

Considering continued expense control and operational leverage release, Tencent is expected to maintain a profit growth rate faster than revenue growth rate trend. The bank basically maintains the net income expectations for 2024/25, adjusting the valuation to 2025, at a 20 times pe, raising the target price to 513 Hong Kong dollars (previously 486 Hong Kong dollars), with a 17% upside from the current price, maintaining a buy recommendation.