Shenwan Hongyuan released a research report stating to maintain a buy rating on Tencent (00700). Due to the performance of DNF mobile game exceeding expectations, profit forecasts have been raised. The target price has been raised from HKD 471 to HKD 473.
According to data monitoring cited in the report, the first month revenue of Tencent's DNF mobile game is expected to exceed RMB 5 billion, which is better than market expectations. DNF mobile game was launched in the Korean version in March 2022, and the Chinese version has a similar path to the Korean version, but the Chinese version has a faster pace and richer content. The first year revenue for the Chinese version can reach RMB 25.2 billion based on the proportion of the monthly revenue accounted for by the Korean version in its first year. In addition to DNF mobile game, core products such as Honor of Kings and Peacekeeper Elite are continuously validated in long-term operations. In the second half of the year, attention should be paid to rich products such as Awakening of Star, Need for Speed Mobile, Delta Force, and Rock Kingdom: World.
The bank pointed out that Tencent had removed some Android application stores for DNF mobile game. It is believed that Tencent's core appeal to the Android phone application market is to reduce the split. Under the trend of boutique, the bargaining power of leading products has increased, and social, short videos, and vertical channels can also meet the new demand. Therefore, removing the Android application store essentially means that the leading products can obtain users from other channels at a lower cost. In the medium term, income from the Android application market may be offset by other channels, and the game profit margin is expected to further increase.