Macquarie: Tencent (00700) rated as "outperform" with target price lowered to HKD 560

Morgan Stanley released a research report stating that it has given TENCENT (00700) an "outperform" rating, adjusting its profit forecasts for the fiscal years 2024 and 2025 by 0% and -1% respectively, which are 2% and 6% higher than market expectations. At the same time, the target price for its H shares was slightly reduced from HK$562 to HK$560. The outlook for Tencent's fourth quarter of fiscal year 2024 is encouraging, reaffirming the positive view on the stock, especially bullish on its strong performance in the gaming sector. The bank believes that Tencent's good revenue structure will continue to drive its profit margins to expand, with total revenue expected to increase by 9% year-on-year in the fourth quarter of fiscal year 2024, and adjusted net profit to rise by 35% year-on-year. Morgan Stanley expects that the new versions of "Delta Force" and "Special Forces Hero" will become emerging growth drivers for Tencent, and predicts that gaming revenue will accelerate from a 12% year-on-year increase in the third quarter of fiscal year 2024 to a 14% year-on-year increase in the fourth quarter. The bank also believes that the monetization level of Tencent's video account is still far below that of its competitors. In the long run, it is believed that as Tencent gradually realizes the monetization potential of its video account business, this business will gradually contribute to Tencent's long-term growth.