Ronald Keung, an analyst from Goldman Sachs, maintained the Buy rating on Tencent Holdings Limited (TCTZF – Research Report). The associated price target is HK$435.00.
Ronald Keung’s Buy rating for Tencent Holdings Limited hinges on several key considerations.
Firstly, he was positively impressed by the company’s 3Q results, which exceeded expectations. Revenue was broadly in line with predictions, showing a year-on-year increase of 10%. The adjusted operating profit was a solid beat, presenting a remarkable 36% growth year-on-year, which was significantly higher than predicted. This return to the highest level of operating margin since 1Q17 is indicative of Tencent’s successful transition to a leaner, quality-growth centric company.
Secondly, Keung identifies a healthy revenue growth and consistent margin improvement as key elements of Tencent’s financial health. The company’s strategy of shifting towards margin-accretive mix and maintaining operational expenditure discipline is projected to result in 10% revenue CAGR and 19% net profit CAGR for 2023-25E. Further, Tencent’s gross profit margin expansion reflects the growth of its high-quality businesses that carry high incremental margins while reducing contributions from less profitable businesses. The anticipated releases of UGC-centric Dream Star, Need for Speed mobile, and other launches in 1Q24 are expected to further boost the company’s financial performance.
In another report released on November 17, Nomura also maintained a Buy rating on the stock with a HK$445.00 price target.
TCTZF’s price has also changed slightly for the past six months – from $43.624 to $41.199, which is a -5.56% drop .
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Tencent Holdings Limited (TCTZF) Company Description:
Tencent is a Chinese Internet giant with businesses and investments in a wide variety of Internet services and contents. Major services include communication and social networking (Weixin/Weixin and QQ), online PC and mobile games, content (news, videos, music, comics, and literature), utilities (email, app store, mobile security, and mobile browser), cloud services, and financial technology. Tenpay in Weixin/Weixin and QQ is a payment solution that enables closed-loop transactions in Tencent’s ecosystems and has been adopted by many third-party partners and offline merchants. Tencent has an aggregate monthly active user base of less than 600 million for QQ and over 1.2 billion for Weixin/Weixin.
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