Morgan Stanley released a report indicating that Tencent (00700.HK) performed far better than expected in the first quarter, with revenue increasing by 13% year-on-year, surpassing market expectations by 3%. The Gaming business exceeded expectations, with an estimated year-on-year growth in revenue of 17%, accelerating compared to the end of last year. Advertising revenue increased by 20%, beating market expectations by 3%. Revenue from CNI Xiangmi Lake Fintech Index and corporate services grew nearly 5%, in line with expectations.
The report indicated that Tencent's gross profit in the first quarter increased by 20% year-on-year, exceeding market expectations by 6%. The gross margin rose by 3.2 percentage points year-on-year to 55.8%. Non-IFRS operating profit increased by 18% year-on-year, surpassing market expectations by 4%.
Tencent's Non-IFRS net profit rose by 22% in the first quarter, with Morgan Stanley indicating it exceeded market expectations by 4%. This year's first quarter share repurchases amounted to 17.1 billion Hong Kong dollars, with an annual repurchase target exceeding 80 billion Hong Kong dollars. Capital expenditures for the first quarter were 27.5 billion yuan, compared to 36.5 billion yuan at the end of last year, and the full-year capital expenditure guidance is a low double-digit percentage of total revenue. Morgan Stanley assigned Tencent a "Shareholding" rating and set a Target Price of 630 Hong Kong dollars.
