Nomura Comments On China's Internet Sector: Notes Concern Over Brand Ad & Travel

In a report published Monday, Nomura analyst Chao Wang commented on China's Internet Sector.

Nomura is optimistic on mobile games, search and eCommerce, but remains wary on brand ad and travel. Wang wrote, “Overall brand ad outlook is weak thus far in 2014. Luxury goods and liquor have been negatively affected since 4Q13 while 1Q/2Q packaged tours were affected by recent tragic events.”

The analyst added that Baidu BIDU and Tencent Holdings are gaining market share from Qihoo 360 Technology QIHU in mobile app distribution according to Nomura's industry checks. Wang remarked that Baidu and Tencent are “aggressively” spending on pre-installation to acquire more mobile app users. Nomura reported that mobile commerce is healthier than expected.

Tencent Holdings: The analyst maintained a Buy rating and lowered the price target from HKD787 to HKD772 due to yuan depreciation. Nomura sees first quarter revenue and EPS to each come in 4 percent above consensus estimates. Wang emphasized that he is more bullish on mobile game contribution as the market may have overestimated the cost of Weixan payment promotion expenses. Tencent is scheduled to report earnings on May 14

• Vipshop Holdings Limited VIPS: Nomura maintained a Buy rating and raised the price target from $204.00 to $210.00. The analyst is confident on PC and mobile traffic growth for the company. Nomura is 9 percent above consensus on first quarter sales and 17 percent above for non-GAAP EPS.
• YY YY: Wang maintained a Buy rating and lowered the price target from $104.00 to $114.00 due to valuation. Nomura is 6 percent above consensus on first quarter sales and 15 percent above for non-GAAP EPS.
• Qihoo 360 Technology: The analyst maintained a Buy rating and lowered the price target from $146.00 to $125.00. Nomura is 8 percent above Bloomberg's consensus on first quarter sales and a whopping 47 percent above for non-GAAP EPS.
• Youku Tudou YOKU: Wang has a Buy rating and $35.00 price target on Youku. The analyst noted concern over the weak ad environment. Due to this concern, Nomura is 1 percent below consensus on first quarter sales and 14 percent below for non-GAAP EPS.