[Foreign Broker Highlights] Nomura Cuts Tencent's Target Price to HK$659, Expects Next Quarter Earnings to Miss Market Expectations

(Economic Information Network Special Report on the 20th) Nomura has cut the target price for Tencent Holdings (00700) by 5%, from HK$695 to HK$659, while maintaining a "Buy" rating.

In a research report, Nomura stated that it expects Tencent's third-quarter revenue to broadly meet expectations, but operating profit will be weaker due to continued AI investments. The firm forecasts revenue to rise 9% year-on-year. Non-IFRS operating profit is projected at RMB 70.3 billion, a 3% year-on-year decline, which is 2% below the latest market consensus; the non-IFRS operating margin is expected to drop 4.1 percentage points year-on-year to 33.5%. Capital expenditure is estimated to reach RMB 58.7 billion, up 11% quarter-on-quarter and 352% year-on-year.

Additionally, gaming revenue for the quarter is expected to rise 7% year-on-year, with domestic growth of 12% and overseas decline of 4% (mainly due to a high base rather than weakening fundamentals). Despite macro headwinds, advertising revenue is expected to increase 18% year-on-year, supported by short-video advertising, while cloud revenue growth is accelerating. (rh)

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