＜Research＞Shenwan Hongyuan: TENCENT 'DNF Mobile' Game 1st-Mth Results Beat; Game Margin Can Further Rise

　　Shenwan Hongyuan noted in a report that based on its monitoring of data on Diandian, it forecasted TENCENT (00700.HK) -2.000 (-0.534%) Short selling $306.36M; Ratio 11.937% 's Dungeon and Fighter (DNF) Mobile game to achieve first-month grossing of over RMB5 billion, higher than the consensus forecast.

　　DNF Mobile's Korean server went online in March 2022. The Chinese server has a similar game pathway to its Korean counterpart, with the Chinese one having a faster game pace. In the broker's view, this meant the Korean server's performance could provide a certain degree of reference. The Korean server's monthly average grossing in the first year is 42% of its first-month grossing. Applying the same ratio and the RMB5 billion first-month grossing, the broker predicted DNF Mobile's Chinese server to log RMB25.2 billion of total grossing in its first year.

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　　Apart from DNF Mobile, other TENCENT core game products such as Honor of Kings and Game for Peace have continued to validate their long-term operational value. The broker is also focusing on TENCENT's fruitful 2H24 pipeline, including Honour of Kings: Breaking Dawn, Need for Speed: Assemble, Delta Force: Hawk Ops, and Roco Kingdom: World.

　　Shenwan Hongyuan highlighted that DNF Mobile has been removed from some Android app stores, and the broker believed that TENCENT's core demand for these app stores is to reduce the commission. The bargaining power of leading products has been increasing, and social, short video, and vertical channels can also meet the demand for marketing. Thus, the broker considered that the removal is essentially a way for leading products to gain users in other channels at a lower cost, which means in the medium term, the revenue from the Android application market may be compensated by other channels, and the game margin ceiling is expected to be further increased.

　　Shenwan Hongyuan raised TENCENT's profit forecast and added its target price from $471 to $473, maintaining its Buy rating, as the performance of DNF Mobile has exceeded expectations.

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　　(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2024-06-28 12:25.)

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