Nomura: Tencent (00700) rated "buy", target price lowered to HK$445.

Nomura released a research report stating that it has maintained a "buy" rating for Tencent (00700), but has lowered the target price from HKD 472 to HKD 445. The report points out that Tencent's Video Account (VA) advertising is likely to be a driving force for future revenue. Tencent's third-quarter revenue increased by 10% year-on-year, with a steady profit growth of 39%. VA is a highlight, with significant growth in advertising revenue on a quarter-on-quarter basis, in line with expectations, mainly due to increased user spending time, despite the stable advertising volume. It is expected that VA advertising may account for 13% of Tencent's advertising revenue in the third quarter, and may reach around 30% by the 2025 fiscal year. The bank believes that the market's focus on Tencent's small game business is misguided, as this business has always accounted for only a small portion of its revenue, despite operating for several years. Tencent's idea of developing small games is to enrich the content library of WeChat's ecosystem, while also being able to gain some benefits from the revenue generated by third-party small game operators, thereby generating some cash flow.