4Q22 results lower than expected; 2022 challenging
? Tencent’s 4Q21 results were lower than we expected.
? The 13% yoy drop in online ad revenue dragged down overall performance. Online
game revenue was impacted by policy, but the performance of fintech and business
services was relatively stable.
? 2022 will be challenging for the industry, and Tencent especially in 1H, given delays in
the launch online game licenses and the implementation of regulations in different
segments.
? We lowered our net profit forecasts slightly for 2022F and 2023F after the 4Q21 results
announcement.
? The cut in net profit forecasts and management guidance is expected to put pressure
on Tencent shares in the near term. We still hold a constructive view on the Company,
as we believe that its investment will translate into future growth. Reiterate ADD with a
new DCF-based target price of HK$485.2 (down from HK$520.3). A near-term catalyst
would be the resumption of the release of online game licenses by the Chinese
government.