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安信国际:腾讯微信生态愈发成熟,核心业务稳健增长

Anxin International: the ecology of Tencent Wechat is becoming more and more mature, and its core business is growing steadily.

安信國際 ·  Apr 9, 2021 10:34  · Opinions

Source: Anxin International

Analyst: Wang Yang

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Using the SOTP valuation method, Anxin International gave Tencent HK $805, corresponding to an estimated PE of 43.8x and 36.7x for 2021 / 2022, respectively, up 32 per cent from the recent closing price, maintaining its buy rating.

In 2020, Q4 Tencent recorded revenue of 133.7 billion yuan, an increase of 26% over the same period last year, and the company's homing net profit recorded 59.3 billion yuan, an increase of 175% compared with the same period last year. Non-GAAP GAAP recorded a net profit of 33.2 billion yuan, an increase of 30% over the same period last year. The overall revenue and GAAP homing net profit are in line with Bloomberg expectations. In the segment business, Q4 value-added services recorded revenue of 66.98 billion yuan in 2020, an increase of 28% over the same period last year; online advertising revenue of 24.65 billion yuan, an increase of 22% over the same period last year; and financial technology and enterprise service revenue of 38.49 billion yuan, an increase of 29% over the same period last year.

The ecology of Wechat is becoming more and more mature.

In the Wechat ecosystem in 2020, more than 120 million users post content on WeChat moments every day, 360 million users read official account articles, and 400 million users use Mini Program. Mini Program and WeChat Pay help small and medium-sized enterprises and brands strengthen their connections with users, and the transaction volume generated through Mini Program more than doubled year-on-year for the whole year.

The launch of the video number has opened up Mini Program and the interface sharing function, allowing brands and companies to expand their audience and promote transactions, especially through Mini Program.

Core mobile games continue to be popular.

The company's Q4 revenue from value-added services increased 28% year-on-year to 67 billion yuan, of which online game revenue increased 29% year-on-year to 39.1 billion yuan. Arena of Valor, the core mobile game, still stands out in 2020, topping the global mobile game bestseller list for two years in a row, and released its largest update in January 2021.

Call of Duty has improved the layout of shooting games other than Game for Peace and Crossing Fire Mobile Games, and Moonlight Blade Mobile Games has become the best-selling MMORPG in China on the iOS platform in 2020.

Social advertising continues to grow

In 2020, Q4 advertising revenue increased 22% year-on-year to 24.7 billion yuan, of which social and other advertising revenue increased by 25% to 20.4 billion yuan. This mainly reflects the increased demand of advertisers for Wechat moments resources and customized in-app advertising solutions for mobile advertising alliances.

Media advertising revenue rose 8 per cent to 4.3 billion yuan, mainly driven by music streaming applications and contributions from Tencent Video's popular TV dramas. Looking forward to the future, the company will continue to strengthen recommendation algorithms and analysis services to improve customer acquisition efficiency and sales conversion rate for advertisers.

Financial Science and Technology pursues steady Development

In 2020, Q4's revenue from financial technology and corporate services increased by 29% to 38.5 billion yuan compared with the same period last year, mainly due to the increase in the total amount of transactions in commercial payment and financial services.

The strategic focus of the company's financial technology business is to actively cooperate with regulators to launch compliant and inclusive financial technology products with industry partners, while giving priority to risk management rather than the pursuit of scale.

Adjust the target price to HK $805 and maintain the buy rating

We estimate that the company's revenue in 2021 / 2022 is 602.9 billion / 733.5 billion RMB, an increase of 25.1% / 21.7% over the same period last year; the adjusted net profit of 2021 / 2022 is 148.9 billion / 178 billion RMB, an increase of 21.3% / 19.6% over the same period last year; and the estimated Non-GAAP EPS in 2021 / 2022 is 15.4 yuan / 18.5 yuan.

We use the SOTP valuation method to give the company HK $805, corresponding to the estimated PE of 43.8x and 36.7x for 2021 / 2022, respectively, an increase of 32 per cent over the recent closing price, maintaining the buy rating.

Risk Tips:The game business is not up to expectations; the development of short video business is facing competition from platforms such as Douyin and Kuaishou, and the business progress is not up to expectations; negative risks in Internet regulatory policies.

Edit / lydia

The translation is provided by third-party software.


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