Rating Quick Look | Alibaba, Xiaomi, Meta Target Prices Raised! Tencent, Kuaishou Receive Positive Outlook

UBS: Tencent Holdings rated "Buy" with a target price of HKD 428

The bank expects Tencent's first-quarter revenue to increase by 6% year-on-year, with adjusted net profit rising by 36% to RMB 44.4 billion, mainly driven by profit growth in high-margin businesses and strong profits from joint ventures (such as Kuaishou and Pinduoduo), with a target price of HKD 428.

The bank predicts that Tencent's domestic gaming performance in the first quarter will be weak, with a expected 5% year-on-year decline, due to the high base of "Honor of Kings" last year and changes in its monetization strategy. However, this impact is expected to be offset to some extent by the strong performance of other games such as "Peacekeeper Elite" and "Game for Peace". International market game revenue is expected to remain flat year-on-year.

In addition, the bank forecasts a 16% year-on-year increase in Tencent's first-quarter advertising revenue, slightly below the market's expectation of 19%, mainly driven by strong growth in Video Accounts (VA) and improvements in advertising technology; a 16% year-on-year increase in financial technology revenue; and a 3.8 percentage point year-on-year increase in gross profit margin to 49.2%.

Morgan Stanley: Raises Xiaomi Group's target price by 14% to HKD 20, boosted by electric vehicle sales

Morgan Stanley: Rates Kuaishou-W as "Overweight" with a target price of HKD 70

The company expects on China's Best Enterprise Day that in 2024, advertising revenue will grow by more than 20% annually, e-commerce GMV will increase by 25% annually, and adjusted net profit will increase by over 60% annually. Kuaishou has already repurchased around HKD 4 billion out of the HKD 3 billion buyback plan, and the current buyback plan may be fully executed in June, when a new, larger buyback plan may be announced.

In terms of advertising, Kuaishou expects advertising revenue to grow by over 20% annually in 2024, mainly driven by closed-loop operations, while external advertising is expected to maintain a year-on-year growth of over 10% in 2024. Full-site promotion and smart advertising products contributed approximately 15-20% of advertising revenue in the fourth quarter of 2023, a figure that is expected to increase further in 2024.

In e-commerce, Kuaishou expects GMV to increase by 25% annually in 2024, mainly driven by Monthly Active Customers (MAC), which reached 130 million in the fourth quarter of 2023, accounting for 18% of monthly active users, still lower than peers. Purchase frequency can also increase from 8 orders per month.

In terms of profit and profit margin, Kuaishou expects adjusted net profit to exceed RMB 16 billion in 2024. Kuaishou will continue to allocate advertising spending to local services and e-commerce coupons.

CICC: Raises Alibaba's target price from USD 108/HKD 104 to USD 111/HKD 107, maintains "Buy" rating

The bank expects Alibaba's total revenue in the fourth quarter of the 2024 fiscal year to be RMB 219.4 billion, a 5% year-on-year increase. The bank expects adjusted EBITA to be RMB 24.5 billion, a 2% year-on-year decrease, with a profit margin of 11%, down 1 percentage point year-on-year, mainly due to continued investment in Taobao to regain market share and industry opportunities in international cross-border business.

Alibaba's e-commerce GMV is expected to increase by 6% year-on-year, with CMR up by 4% year-on-year. In other businesses, international business is expected to grow by 46%, local services by 16%, Cainiao by 23%, and cloud by 5% The bank stated that Taotian's initial results are promising, but continuous observation is needed on the sustainability of e-commerce GMV/CMR growth. Increased investment in overseas business is expected to double losses by 2024, but it is also expected to boost AliExpress GMV to around $100 billion, nearly doubling year-on-year. The bank maintains a 9% revenue growth expectation for the fiscal year 2025, but due to Taotian and overseas businesses being in investment cycles, the adjusted net profit growth for fiscal year 2025 is lowered to 4%.

Daiwa: Reiterates "Buy" rating on BYD, maintains target price of HKD 320

The report states that the domestic market is highly competitive, and BYD sells more premium models overseas to reduce pricing pressure on mass-market models. Management indicated that export profits are at least 20,000 RMB per vehicle, while profits from domestic sales are less than 10,000 RMB. Premium models have a gross profit margin of at least 30%, compared to 20% for mass-market models.

The report highlights that BYD aims to achieve overseas sales of 500,000 vehicles this year, with an expected increase in contribution from the South American market. BYD will introduce plug-in hybrid electric vehicles (PHEVs) locally, and may later produce and sell them in Thailand for the ASEAN market. The Hungary plant is expected to be ready in the second half of next year, with the bank anticipating more aggressive pricing locally. The bank holds a positive view on BYD's overseas sales.

Wedbush: Raises Meta Platforms' target price from $520 to $570