According to Huasheng Information on May 16, benefiting from strong performance, Tencent surged more than 5% to above the HK$400 mark in the early trading session. The stock price hit a new high since the end of January 2023; Tencent has risen 36% this year.

Tencent's revenue in the first quarter increased by 6% year-on-year to 159.501 billion yuan, and its adjusted net profit increased by 54% year-on-year to 50.265 billion yuan. Specifically, among Tencent's three core business segments, online advertising revenue was 26.506 billion yuan, up 26.44% year-on-year; financial technology and enterprise service revenue was 52.302 billion yuan, up 7.39% year-on-year; value-added service revenue was 78.629 billion yuan, down 0.89% year-on-year.

It is also worth noting that the total user usage time of Tencent's video account in the first quarter increased by more than 80% year-on-year. Tencent executives said at the performance meeting that the time users spent on the video account has exceeded that of "friend circle" by twice.

Related reading: One chart to understand | Tencent's Q1 net profit was 41.9 billion yuan, a year-on-year increase of 62%

What do the big banks think?

In the face of the impressive first quarter report, let's see what the big banks say:

Goldman Sachs released a research report saying that it still regards Tencent as one of the most eye-catching and influential companies among China's large Internet stocks because the stock can continue to have an annual profit growth of more than 20%, and pointed out that Tencent's game growth is accelerating, advertising market share revenue and profit margins are attractive. Maintain Tencent's "buy" rating and raise the target price by 14.2% from HK$408 to HK$466.

Jefferies said that Tencent's first-quarter revenue was in line with expectations, and its non-IFRS net profit exceeded expectations. It believes that Tencent has demonstrated strong execution in its high-quality growth strategy, maintains a buy rating and raises its target price to HK$475.

CICC believes that Tencent Advertising may show more commercial potential based on user behavior and traffic trends (such as video accounts and mini programs). Although the growth rate of video account traffic will inevitably slow down due to technical factors, the growth of advertising may not only rely on the video account as a driving factor. We expect Q2 advertising revenue to increase by 14% year-on-year to RMB 28.5 billion.

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