In today’s briefing:
- Tencent Q1 FY24 Results Due, a Look into What Is Priced
- Tencent (700 HK): Q1 FY24 Results Quick Take, Margin Expansion Drives Decent Set of Results
- Japan – Another Big Round of Passive Selling
- Tencent (700 HK): 1Q24, Highest Margin in Seven Years
- Intel’s Foundry Chief Runs For The Hills
- Tencent: Online Advertising and High-Margin Businesses Support Earnings
- Tech Supply Chain Tracker (15-May-2024): Taiwan announces IC Taiwan Grand Challenge Competition.
- Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E
Tencent Q1 FY24 Results Due, a Look into What Is Priced
- Tencent is due to release Q1 FY24 results today. The earnings call is scheduled for 14:00 SAST
- In this note, we unpack what is priced and how Tencent has performed relative to constituents in the HSTECH index since our last update (29 April).
- We also provide an update on how the discounts of Naspers and Prosus have traded.
Tencent (700 HK): Q1 FY24 Results Quick Take, Margin Expansion Drives Decent Set of Results
- Tencent reported a decent set of results for Q1 FY24. Revenue for the quarter was up 2.8% QoQ and 6.3% YoY, ahead of consensus estimates (2.3% & 5.9%).
- The gross margin came in at 53%, 3 percentage points ahead of consensus, and an increase of 7 percentage points on Q1 FY23.
- The gross margin for the Fintech and Business Services segment, which accounts for 33% of revenue, increased by 12 percentage points to 46% (consensus 42.6%).
Japan – Another Big Round of Passive Selling
- There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
- Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
- Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.
Tencent (700 HK): 1Q24, Highest Margin in Seven Years
- The operating margin in 1Q24 reached the highest since 2Q16, as the gross margins of all businesses improved.
- The growth rate of online advertising is high than our estimate, but the growth rate of FinTech is lower than our estimate.
- We believe there is still an upside of 9% and the price target will be HK$415 for the end of 2024.
Intel’s Foundry Chief Runs For The Hills
- In a surprise move, Intel announced that its foundry chief Stuart Pann is to retire from the company effective end of May after just over one year in the role
- He will be replaced by former IBM, Globalfoundries and Marvell executive Kevin O’Buckley, effective immediately
- Mr. O’Buckley now has the dubious distinction of being the third leader of IFS in as many years.
Tencent: Online Advertising and High-Margin Businesses Support Earnings
- Tencent (700 HK) reported 1Q2024 results today. Both revenues and OP grew 6.3% and 30.0% YoY respectively and beat consensus estimates.
- Though domestic games revenues declined YoY, there were signs of recovery in Tencent’s gaming business. Online advertising saw strong growth despite 1Q being a seasonally weak quarter for Tencent.
- Tencent’s investments in high-margin products have helped boost the company’s margins across all business segments.
Tech Supply Chain Tracker (15-May-2024): Taiwan announces IC Taiwan Grand Challenge Competition.
- Taiwan launches IC Taiwan Grand Challenge to attract innovative teams and talent, offering opportunities to showcase skills and win prizes.
- Navigating AI investments during upgrades: on-premise or cloud computing? Make informed choices for hardware and software advancements.
- Taiwan’s LEO satellite program readiness questioned; virtual power plants used in Taiwan and Japan to mitigate earthquake risks; TPCA partners with Taiwanese industry association to boost talent and supply chains for Thai electronics manufacturing growth; Intel appoints new head of foundry services.
Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E
- Hon Hai reported 1Q24 revenue that fell 9% YoY, however the company reiterated its guidance for significant growth in 2024E and said growth now looks stronger than guided in March.
- Hon Hai’s cloud (including servers) business didn’t grow as much as guided due to material shortages; but AI server revenue up 200% YoY and significant growth is guided for 2024E.
- The traditional server market is rebounding, to grow double digits in 2024E. Hon Hai expects to take market share in 2024. Structural Long but near-term gains could be limited.
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