According to a research report published by BOC International, Tencent's total revenue for the first quarter was 159.5 billion yuan, up 6% year-on-year and 3% quarter-on-quarter, in line with the bank's and market expectations. Gross margin and adjusted operating margin were 53% and 37% respectively, an improvement over the same period last year. Adjusted net profit was $50.3 billion, up 54% year-on-year, significantly faster than revenue growth; adjusted earnings per share of $5.26, up 57% year-on-year, exceeding the bank's and market expectations of 17% and 18%.
The bank said that considering that new games such as “Dungeons and Warriors” will soon be launched, while many old games such as “Wang Zhe Rongyao” have resumed growth. At the same time, deferred revenue for the first quarter increased 23% quarterly, and game revenue is expected to grow at an accelerated pace. Video accounts will benefit from the establishment of a merchant and user ecosystem, and monetization will be further enhanced. The bank expects Tencent's revenue to increase 7% to 159.9 billion yuan in the next quarter, the advertising business by 16% to 290 billion yuan, the game business by 4%, and the corporate service blockage by 16%. The bank also expects the Group's gross profit to increase by 17%, management guided the annual growth rate of promotion expenses by more than 10%, and the expected trend of profit growth faster than revenue for the whole year.
The bank anticipates that Tencent's revenue for the 2024 and 2025 fiscal years will increase by 8.2% and 7.8%, respectively, and raise the adjusted net profit forecast by 6% and 7%. The target price will be raised from HK$395 to HK$457, maintaining the “buy” rating.