On May 18, Tencent announced its results for the first quarter ended March 31, 2022. The financial report shows:

• Q1 revenue was 135.471 billion yuan (RMB, the same below), compared with 135.303 billion yuan in the same period last year, flat year-on-year;

• Q1 net profit was 23.413 billion yuan, down 51% year-on-year;

• Q1 adjusted net profit was 25.545 billion yuan, a year-on-year decrease of 23%;

• Diluted earnings per share in Q1 were 2.404 yuan, compared with 4.917 yuan in the same period last year.

On May 19, the Hong Kong stock market opened, and Tencent opened lower and moved lower. It once fell by more than 8%. As of press time, Tencent fell by more than 6% to HK$341.6, with a turnover of HK$17.978 billion.

The market has attracted a lot of attention, and major institutions have followed the news and commented on Tencent’s financial report from various angles. As of May 19, 65 analysts on Bloomberg gave Tencent a “buy” rating, accounting for about 90.3%; 4 analysts gave a “hold” rating, accounting for about 6.9%; 2 analysts gave “Sell” rating. The consensus target price is HK$487.68.

The following are the latest views on Tencent from some institutions compiled by Futu Information:

Morgan Stanley: Maintain Tencent’s “overweight” rating, with a target price of HK$450

Rating: Overweight

Target price: HK$450

According to the Morgan Stanley Research Report, it maintains Tencent’s “overweight” rating, and reduces its 2022-24 revenue forecast by 5%/6%/7%, non-IFRS operating profit is lowered by 2%/3%/2%, and the target price From HK$480 to HK$450. The bank expects the weak growth of the game business to continue into the second quarter of this year, and estimates that the gross revenue of games will drop by 4% year-on-year, reflecting the seasonal and ongoing impact of minor protection measures. Growth in international games is expected to be flat year-on-year, mainly due to the normalization of user spending after the epidemic. At the same time, it believes that the advertising business has not bottomed out, and it is estimated that it will drop by 25% in the second quarter, mainly due to the impact of the epidemic.

UBS: Tencent’s Q1 situation is weak, and the market is expected to react negatively to the performance

Rating: Buy

Target price: HK$450

UBS said that Tencent’s total revenue during the period was 1.5%/3.7% worse than the bank/market expectations, while adjusted EBIT was basically in line with the bank and market expectations. In addition, its online advertising/fintech and business services business revenue missed the bank’s forecast by 3.9%/4.7%. Looking ahead to the second quarter, the bank expects the advertising business to remain weak, while commercial payments will continue to be weak since mid-March. Management reiterated plans to control costs and improve non-core businesses this year. The bank expects the market to react negatively to Tencent’s performance, maintaining a target price of HK$450 and a “buy” rating.

Credit Suisse: Tencent’s weak earnings outlook drags down its share price, lowers its target price to HK$427

Rating: Outperform

Target price: HK$472

Credit Suisse said that in the first quarter, Tencent achieved revenue of 136 billion yuan (RMB, the same below), flat year-on-year, while the performance of the game and cloud business was 4% lower than expected. The company’s adjusted net profit of 25.5 billion yuan (down 23% year-on-year) was also lower than expected, mainly dragged down by the gaming, advertising, financial technology and business services businesses. The bank believes a weak earnings outlook will weigh on its share price in the short term. Patience is still required for Tencent’s business transition year. The bank lowered its target price by 10% from HK$524 to HK$472 and maintained its “outperform” rating.

Yamato: Tencent’s performance will start to recover in the second half of the year, maintain a “buy” rating

Rating: Buy

Target price: HK$480

Yamato believes that Tencent’s performance in the first quarter was roughly in line with expectations. Although losses caused by the epidemic, macro uncertainties and strategic changes in cloud services may make its revenue growth in the second quarter relatively flat year-on-year, with the easing of regulatory impact and new With the launch of games and the monetization of video accounts, Tencent’s performance is expected to recover from the second half of the year. The bank lowered its revenue forecast for 2022-24 by 1-4%, lowered the target price by 9% from HK$525 to HK$480, and maintained a “buy” rating.

Citi: Cut Tencent’s target price to HK$512, citing poor performance in financial technology and business services

Rating: Buy

Target price: HK$512

Citi Research pointed out that Tencent’s revenue in the first quarter of this year was nearly flat year-on-year, which was 1.7% lower than the bank’s conservative forecast, mainly due to the company’s strategic transformation and deployment of cloud services, and the impact of the epidemic in March on payment transaction volume. During the period, financial technology and business services Poor business performance. The bank lowered the company’s revenue forecast for fiscal years 2022 to 2024 by 2.1%, 2.5% and 2.9% respectively, and raised its profit forecast by 5.7%, 33.9% and 0.7%. Game revenue is forecast to increase by 5% and 11% year-on-year to RMB 33.8 billion and RMB 12 billion respectively. We maintain a “buy” rating on Tencent, and the target price is lowered from HK$522 to HK$512.

Goldman Sachs: Tencent is expected to face short-term challenges in the second quarter, optimistic about growth in the second half of the year

Rating: Buy

Target price: HK$559

Goldman Sachs research report pointed out that Tencent’s first-quarter revenue was flat, 5% lower than the bank’s expectations, but operating profit was basically in line with expectations under active cost control. The bank expects that the main adverse factors in the second quarter will be the impact of the macro economy and the epidemic, but it believes that Tencent’s ecosystem has a unique positioning, and has a leading position in the fields of games, advertising and cloud business. relatively resilient recovery and growth. The bank has a “buy” rating on Tencent.

Due to the impact of normalization after the epidemic, international game revenue was lower than expected. However, Goldman Sachs said that Tencent’s market share is still increasing, and the growth rate of revenue is also higher than that of its peers; the revenue of the local game business improved in March, and it is expected that the trend will continue into the second quarter, and there may be a more obvious recovery in the second half of the year.

CMB International: Tencent’s stock price is under pressure in the short term, and the target price is lowered to HK$480

Rating: Buy

Target price: HK$480

CMB International Research Report pointed out that Tencent’s performance in the first quarter of 2022 is weak, and its stock price may be under pressure in the short term. It is recommended to focus on the long-term upside of its new games, advertising recovery and video accounts. The bank said that by market segment, value-added services/advertising/others increased by 0%/-18%/+9% year-on-year, the bank estimated a year-on-year increase of 3%/-19%/+15%; games decelerated to + 0%, mainly due to the lack of momentum in overseas games. It is expected that the game business will accelerate moderately in the second quarter, and the contribution of new games will be seen in the second half of this year; advertising revenue fell by 18% year-on-year, in line with expectations, but due to the reduction in advertising budget since March, the second half of Quarterly headwinds should continue. At the same time, the financial technology and business services (FSB) and other businesses will further slow down in the second quarter due to the impact of the epidemic and the cloud computing business focusing more on quality growth. The bank lowered the company’s FY22-24 earnings by 11% to 15%, and the target price fell 31.1% from HK$510 to HK$480, maintaining a “buy” rating.

BOCOM International: Cost reduction and business optimization are key this year

Rating: Buy

Target price: HK$495

BOCOM International pointed out that Tencent’s revenue in the first quarter of 2022 was 135.5 billion yuan (the same below), flat year-on-year. Under the pressure of games/advertising, revenue was 4% lower than the bank/market expectation. Due to the short-term impact of the epidemic and the macro environment, the bank lowered its revenue for 2022/23 by 2.6%/2.2%; cost reduction and business optimization are the keys to this year. With cost control, the decline in profit margins in the second half of the year will be narrowed. The bank said game distribution plans and WeChat video account monetization progress will be key variables for the near-term financial outlook and valuation improvement. Based on the SOTP valuation method, the bank lowered its target price by 5% from HK$521 to HK$495. Maintain “Buy” rating.

CICC: Maintain Tencent’s “Neutral” rating, cut target price to HK$428

Rating: Neutral

Target price: HK$428

The CICC Research Report stated that it maintains the “Neutral” rating of Tencent Holdings, and the target price is reduced by 5% to HK $428, which is 17% higher than the current share price, corresponding to an adjusted P/E of 29.4x2022e. The bank said that the performance of the company’s game business is in line with expectations, and it is expected that the impact of the company’s game business will continue in 2Q22, and the game revenue will be basically flat month-on-month. It is expected that in 2H22, under the background of advertising system optimization and video account monetization, advertising revenue is expected to resume growth.

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