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<Research>HSBC Global Research Cites TENCENT (00700.HK)'s Forecast that Margin Expansion Will Continue in Short-to-mid Term
Recommend 24 Positive 35 Negative 13 |
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HSBC Global Research cited TENCENT (00700.HK)’s forecast that margin expansion will continue in the short to medium term, while maintaining investment in technology with multiple levers to defend against macro headwinds, particularly in advertising. The broker maintained a Buy rating on TENCENT, with a target price of $475. It was optimistic about TENCENT’s favorable revenue mix in high-margin segments, ongoing cost control, low valuation, and attractive total return to shareholders. While the benefits of cost optimization from exiting underperforming business or merging overlapping teams have largely been realized, the broker believed that a shift in revenue mix to higher-margin segments and continued cost control could pave the way for sustainable earnings growth in the short to medium term. In addition, TENCENT expected to spend 9% of its revenue on capex in 2024, of which 2% will be used for non-operational purposes such as office buildings, with most of the rest spent on chips and data centers; and the top priority will be to is to train its Hunyuan foundation model. However, the actual expenditure will depend on the supply of chips in the US and in China. AAStocks Financial News |
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