Damo: raise Tencent’s target price by 10.77% to HK $720

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Zhitong financial app learned that Damo released a research report and raised the target price of Tencent (00700) by 10.77% from HK $650 to HK $720, which is 38 times of this year’s non GAAP P P / E ratio, maintaining the rating of “overweight”.
The bank expects Tencent (00700) to achieve a revenue of 129.2 billion yuan in the fourth quarter of last year, a year-on-year growth of 22% or a quarterly increase of 3%, 2% lower than the market expectation, reflecting the normalization of the company’s mobile games and financial technology business. Non GAAP based operating profit was 37.4 billion yuan, up 23% year on year or down 2% quarter on quarter, lower than market expectation.
In addition, the bank expects that Tencent’s value-added service revenue will reach 66.1 billion yuan in the last quarter, up 26% year-on-year. Among them, mobile games increased by 39% year-on-year, 60% year-on-year in the first nine months of last year, which is normal, reflecting the difficult performance brought about by the merger of supercell in the fourth quarter of 2019, as well as the decrease of deferred income.
From a positive point of view, the bank sees the healthy momentum of the company’s new game releases, such as Tianya Mingyue Dao, League of Heroes: Jidou Canyon and decisive moment: Mobile, which only eat into the company’s original games to a limited extent, the report said.
The bank said that although the timetable is still uncertain, the recent reopening of the test server of “dungeons and Warriors” mobile game and the potential positive factors of gross profit rate of games with lower income share in Android channel provide the company with better sustainable growth prospects.