CMS Slightly Raises Tencent TP to $474; Strong Game Recovery Drives 2Q Results

China Merchants Securities (CMS) slightly raised its target price for Tencent from $470 to $474, maintaining an Overweight rating. This adjustment comes after Tencent's strong 2Q24 performance, driven by a robust recovery in gaming and growth in advertising, which led to profits exceeding expectations.

Tencent's revenue for 2Q24 met expectations, while profits surpassed forecasts.
CMS expects Tencent's revenue to grow 10% YoY in 3Q24, mainly due to strong gaming performance.
Profit margins are expected to expand, with non-IFRS operating profit anticipated to grow 32% YoY and operating margin projected at 40.2%.
Tencent has repurchased about $61.4 billion worth of shares year-to-date, maintaining a $100 billion buyback target for the year.

CMS adjusted its revenue forecasts for FY24 to FY26, factoring in lower projections for financial and business services, but raised its non-IFRS net profit forecast by 10-12%, expecting further margin improvement.