China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

HK Connect SOUTHBOUND Flows (To 28 Mar 2024); Strong Net Buying on Tencent, Telcos, and Energy

A/H Premium Tracker (To 28 Mar 2024):  Liquid AH Premia Still Very Wide

HK Connect SOUTHBOUND Flows (To 12 Apr 2024); Strong Net Buying. New State Council and CSRC Plans

Blue Lotus Non US Internet research, Blue Lotus Research Institute

Ying Pan

Blue Lotus Non US Internet research

Equity Bottom-Up

<ul>
<li>Tencent reported C4Q23 revenue, IFRS operating profit, and non-IFRS net income in-line with our estimates and in-line with consensus, with non-game revenues exceeding while game revenue missing expectations;</li>
<li>We believe the shift from game to non-game should enhance Tencent multiples but the market might have concerns on the sustainability of this change. </li>
<li>We believe this change is sustainable with game revenue reaccelerating and non-game revenue continues to gain weight. We cut TP by 3% to reflect slow game recovery in C1H24.</li>
</ul>


Tencent reported C4Q23 revenue, IFRS operating profit, and non-IFRS net income in-line with our estimates and in-line with consensus, with non-game revenues exceeding while game revenue missing expectations;
We believe the shift from game to non-game should enhance Tencent multiples but the market might have concerns on the sustainability of this change. 
We believe this change is sustainable with game revenue reaccelerating and non-game revenue continues to gain weight. We cut TP by 3% to reflect slow game recovery in C1H24.


[Tencent (700 HK, BUY, TP HK$351) TP Change]: Improvement of Earning Quality Should Be Sustainable