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Investment Rating - The report does not explicitly state an investment rating for the company [3]. Core Insights - WeChat Pay MY will stop new user registrations from August 1, 2024, and cease payment services by September 1, 2024, due to local business strategy adjustments in Malaysia. Existing users can still withdraw funds, and the service for Chinese tourists remains unaffected [3]. - WeChat Pay's international business is expanding, covering 74 countries and regions, supporting 31 currencies, with over 1,000 overseas partners and more than 6 million merchants. Monthly transaction volume and number of transactions have seen significant growth, with over 6 times and 4 times year-on-year increases, respectively, as of June 2024 [3]. - Tencent's new tactical shooting game "Delta Operation" is set to launch in September, promising an innovative gaming experience while retaining classic elements. The game has generated significant interest at events like ChinaJoy [3][27]. Summary by Sections WeChat Pay Developments - WeChat Pay MY will halt new registrations and payment services in Malaysia, but existing users can still access their funds. The service for Chinese tourists in Malaysia remains intact [3][28]. - WeChat Pay's international operations are thriving, with substantial growth in transaction numbers and amounts, indicating a robust expansion strategy [3]. Gaming Sector Updates - The National Press and Publication Administration approved 15 new games, including Tencent's "Rainbow Six" and "Final Fantasy XIV," which are expected to perform well in the market [26]. - Tencent's "Delta Operation" is anticipated to provide a unique gaming experience, leveraging advanced technology and gameplay mechanics, and is expected to attract a large player base upon release [27].

Investment Rating - The report provides a positive outlook on Tencent Holdings (700.HK) with expectations of continued growth in the gaming sector, particularly driven by new product launches in the second half of the year [5]. Core Insights - The Chinese gaming industry showed stable growth in the first half of 2024, with actual sales revenue reaching 147.27 billion yuan, a year-on-year increase of 2.1%. Mobile games accounted for 73% of this revenue, although their growth rate has slightly declined. In contrast, mini-program games experienced a rapid growth rate exceeding 60% [5]. - The primary growth driver for the gaming industry remains overseas markets, with domestic sales revenue from self-developed games decreasing by 3.3% to 117.74 billion yuan, while overseas market revenue increased by 4.2% to 8.55 billion USD [5]. - Tencent's market capitalization stands at 3338.8 billion HKD, with a total share capital of 9.321 billion shares. The stock price is currently at 358 HKD, with a 52-week high of 400.2 HKD and a low of 256.8 HKD [5]. - The report highlights the anticipated 10% year-on-year growth in Tencent's gaming revenue in the second half of the year, driven by new game releases such as "Dungeon & Fighter" mobile game [5]. - Tencent's new game "Brawl Stars" is set to launch its first domestic test on July 30, 2024, which is expected to attract a significant player base due to its short gameplay duration, catering to the fast-paced lifestyle of players [5]. Summary by Sections Industry Overview - The Chinese gaming market's actual sales revenue for the first half of 2024 was 147.27 billion yuan, with a growth rate of 2.1%. The user base for gaming remains stable at approximately 670 million, reflecting a year-on-year increase of 0.9% [5]. - The overseas market continues to be a significant growth area, with self-developed games seeing a decline in domestic sales but an increase in international revenue [5]. Company Performance - Tencent's gaming revenue is projected to grow by 10% year-on-year in the latter half of 2024, supported by the launch of new titles and the sustained performance of existing games [5]. - The report notes that Tencent's "Brawl Stars" has already achieved significant success in global markets, indicating strong potential for further growth in the domestic market [5].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (0700 HK) with a target price of 430 HKD [3][4] Core Views - Tencent's investment portfolio is undervalued, with its holdings in listed companies potentially reaching 500 billion RMB [4] - Tencent's investment value in listed companies grew by 6 6% YoY in Q1 2024, reaching 356 8 billion RMB [4] - Tencent's holdings in 67 listed companies across public markets totaled 528 1 billion RMB as of June 2024, a significant YoY increase [4] - Tencent's US-listed holdings saw a 52% YoY increase in market value, reaching 421 2 billion RMB, accounting for 80% of its total listed holdings [4] Investment Portfolio Analysis Listed Companies - Tencent's investment in listed companies grew by 6 6% YoY in Q1 2024, reaching 356 8 billion RMB [4] - Tencent's holdings in 67 listed companies across public markets totaled 528 1 billion RMB as of June 2024, a significant YoY increase [4] - US-listed holdings saw a 52% YoY increase in market value, reaching 421 2 billion RMB, accounting for 80% of its total listed holdings [4] - A-share holdings decreased by 34% YoY to 151 billion RMB, while Hong Kong-listed holdings increased by 1% to 698 billion RMB [4] Non-Listed Companies - Tencent's investment in non-listed companies decreased by 1 2% YoY in Q1 2024, totaling 325 9 billion RMB [42] - The total investment in both listed and non-listed companies reached 682 6 billion RMB in Q1 2024, a 2 7% YoY increase [42] Financial Performance - Q1 2024 Non-IFRS net profit reached 502 65 billion RMB, a 54% YoY increase, with a net profit margin of 31 5%, up 9 8 percentage points YoY [4] - Gross margin improved to 52 6%, up 7 2 percentage points YoY, driven by high-margin businesses such as WeChat Video Accounts and mini-games [4] - Video Account total user time increased by over 80% YoY in Q1 2024, with mini-game MAU exceeding 500 million and daily usage reaching 60 minutes [4] Business Segments Gaming - Domestic gaming revenue declined by 2% YoY in Q1 2024, while overseas gaming revenue grew by 3% [103] - Deferred revenue reached a historical high of 106 1 billion RMB in Q1 2024, up 9 2% YoY, indicating potential future revenue growth [4] - Key games such as "DNF Mobile" and "Delta Action" are expected to drive future performance [4] Advertising - Advertising revenue grew by 26% YoY in Q1 2024, outperforming the industry average of 4 6%, driven by WeChat Video Accounts and mini-programs [114] - Video Account advertising is expected to continue contributing to revenue growth, with low marginal costs due to existing WeChat infrastructure [145] Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services grew by 7% YoY in Q1 2024, reaching 523 billion RMB [96] - Gross margin in this segment improved to 45 6%, driven by high-margin services such as wealth management and Video Account merchant service fees [120] Share Repurchase and Capital Allocation - Tencent's share repurchase program reached 375 15 billion HKD in Q2 2024, a 206% YoY increase [22] - The company plans to repurchase over 100 billion HKD in 2024, doubling the 2023 repurchase amount of 49 billion HKD [30] - Major shareholder Prosus's repurchase plan is expected to reach 54 1 billion HKD in 2024, remaining at a low level [21] Valuation and Outlook - The report forecasts Tencent's Non-IFRS net profit for 2024-2026 to be 2115 5, 2364 7, and 2554 2 billion RMB, respectively, representing increases of 13 3%, 12 4%, and 11 3% from previous estimates [97] - The current price implies a Non-IFRS PE of 15x, 14x, and 13x for 2024-2026, respectively [97]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings, with a target price of HKD 397.82 (RMB 363.51) [80] Core Views - The report highlights the potential of WeChat's live-streaming e-commerce, emphasizing its unique traffic advantages compared to Douyin and Kuaishou, particularly due to its diversified traffic sources including private domains (group chats, private moments) and public domains (Video Account) [2] - WeChat's live-streaming e-commerce GMV is expected to grow significantly, driven by both private and public domain traffic, with Video Account being the largest traffic source [2][5] - The report estimates the long-term GMV ceiling for Video Account at 2.07 trillion RMB, based on assumptions including DAU of 680 million, feed stream density of 2.5 times per minute, average browsing time of 79.4 minutes, live-streaming loading rate of 8.4%, conversion rate of 0.4%, and average order value of 125 RMB [5] Private Domain GMV - The private domain is expected to contribute 1.3 trillion RMB in GMV, including 800 billion RMB from existing mini-program merchants and 480 billion RMB from the new "Shop Share Alliance" model [5][7][21] - The "Shop Share Alliance" model allows merchants to share their shops through personal WeChat and enterprise WeChat, enhancing exposure and conversion rates [21] Public Domain GMV - The public domain, primarily driven by Video Account, is expected to contribute 2.07 trillion RMB in GMV [5][10] - Video Account's GMV is calculated based on factors such as DAU, average browsing time, feed stream density, live-streaming loading rate, conversion rate, and average order value [5] Organizational Changes - Tencent announced a significant organizational restructuring in May 2024, integrating the Video Account live-streaming e-commerce team into the WeChat Open Platform team, which is expected to accelerate the conversion of mini-program GMV to Video Account [14] - This restructuring aims to resolve conflicts between the mini-program and Video Account teams, potentially leading to faster GMV conversion and increased revenue from technical service commissions [14] Content Ecosystem and Creators - Video Account's DAU growth is closely tied to the number of content creators, with current creators primarily coming from public accounts (17%), Douyin (26%), and Kuaishou (21%) [34][35] - The report estimates that Video Account could reach 680 million DAU, driven by 186 million content creators, with a significant portion coming from WeChat's native users and mid-to-long-tail creators from Douyin and Kuaishou [112][113] - Video Account's content ecosystem is expected to be more knowledge-oriented compared to Douyin's entertainment-focused content, with a projected distribution of 65% life-related content, 17% entertainment, 1% news, and 17% knowledge-related content [130] Monetization and Revenue Growth - Video Account's e-commerce business is expected to enter a rapid growth phase starting in 2024, with low marginal costs driving profit elasticity [80] - The report forecasts Tencent's IFRS net profit for 2024-2026 to be 170.8 billion, 196.9 billion, and 226.5 billion RMB, respectively, with non-IFRS net profit expected to be 216.2 billion, 251.1 billion, and 285.2 billion RMB [80]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HKD 397.82 (RMB 363.51, HKD/RMB=0.91) [4][5] Core Views - Tencent's WeChat Live E-commerce has undergone significant organizational changes, including the addition of new features like "Shop Share Assistants" and new tools like "Quanyutong" for e-commerce traffic, with a potential GMV ceiling of 3.6 trillion RMB [3] - Private domain GMV is expected to reach 1.3 trillion RMB, driven by the conversion of existing mini-program merchants (800 billion RMB) and the incremental GMV from Shop Share Assistants (480 billion RMB) [3] - Public domain GMV is projected at 2.4 trillion RMB, with 280 billion RMB from朋友圈广告推流 and 2.07 trillion RMB from video号推流 [3] - Video号 DAU is expected to reach 680 million, driven by 186 million content creators, with average user time on the platform estimated at 80 minutes [3] - Video号's e-commerce is expected to enter a rapid growth phase starting in 2024, with IFRS net profit forecasts for 2024-2026 at 170.8 billion, 196.9 billion, and 226.5 billion RMB, respectively [4] Financial Projections - Revenue growth is expected to accelerate, with 2024-2026 revenue forecasts at 685.02 billion, 774.44 billion, and 840.91 billion RMB, respectively [11] - Operating profit is projected to grow significantly, with 2024-2026 forecasts at 222.3 billion, 264.62 billion, and 304.98 billion RMB, respectively [11] - Net profit attributable to shareholders is expected to rebound, with 2024-2026 forecasts at 170.82 billion, 196.87 billion, and 226.49 billion RMB, respectively [11] E-commerce Growth Drivers - The integration of WeChat Live E-commerce with mini-programs and公众号 is expected to accelerate GMV conversion, with a potential conversion ceiling of 800 billion RMB [3][54] - The Shop Share Assistant feature is expected to bring incremental GMV of 480 billion RMB, leveraging social裂变 and联盟模式 [3][36] - Video号's e-commerce growth is driven by its unique content ecosystem, with a focus on non-entertainment content, which is expected to account for 77% of public domain traffic [3][27] Content Ecosystem - Video号's content creators are primarily sourced from公众号 (17%), Douyin (26%), and Kuaishou (21%), with the remaining 36% coming from other platforms [88] - The platform's content is skewed towards严肃向 content, with泛生活,泛娱乐,泛资讯, and泛知识 categories expected to account for 65%, 17%, 1%, and 17% of content, respectively [162] - Video号's DAU is expected to grow to 680 million, driven by 186 million content creators, with a focus on泛生活 and泛知识 content [107][108] Market Positioning - Video号's e-commerce is positioned differently from Douyin and Kuaishou, leveraging WeChat's私域流量 and公域流量 to create a unique ecosystem [3][25] - The platform's直播加载率 is expected to be lower than Douyin's, at 8.4%, with a steady-state成交单价 of 125 RMB,介于抖快之间 [3][27]

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Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (0700 HK) [2] Core Views - Tencent's 24Q2 revenue is expected to reach 1618 billion yuan, a year-on-year increase of 8 5% [2] - Non-IFRS net profit is projected to be 502 billion yuan, up 33 6% year-on-year [2] - The company's gaming business is performing well, with domestic and overseas game revenues expected to grow by 8% and 14% respectively [2] - Advertising revenue is anticipated to increase by 22% to 305 billion yuan, driven by WeChat video ads and mini-program ads [2] - Financial technology and enterprise services revenue is forecasted to grow by 7% to 520 billion yuan [2] Business Segment Analysis Gaming Business - Domestic gaming revenue is expected to reach 343 billion yuan, up 8% year-on-year, with new game "DNF Mobile" performing exceptionally well [2] - Overseas gaming revenue is projected to grow by 14% to 145 billion yuan, with "Brawl Stars" and "Squad Busters" contributing significantly [2] - Several new games are scheduled for release in the second half of 2024, including "Need for Speed: United" and "World Genesis" [2] Advertising Business - WeChat video ads are expected to drive growth, with the integration of video e-commerce into the WeChat ecosystem [2] - Mini-program ads are also performing strongly, benefiting from small game and short drama advertising [2] Financial Technology and Enterprise Services - Payment revenue growth has slowed due to weak offline consumption, but enterprise services continue to grow rapidly [2] - The company's AI capabilities, including the upgraded Hunyuan model and Yuanbao APP, are expected to enhance long-term competitiveness [2] Financial Projections - Revenue for FY2024-2026 is projected to be 6710/7333/7957 billion yuan, with year-on-year growth of 10 2%/9 3%/8 5% [2] - Non-IFRS net profit for the same period is expected to be 2180/2488/2729 billion yuan, with year-on-year growth of 38 3%/14 1%/9 7% [2] - The company's PE ratio under the Non-IFRS framework is projected to be 15/13/12x for FY2024-2026 [2]

Investment Rating - The report maintains a "Recommended" rating for Tencent Holdings, with a target price range of HKD 453.08 to HKD 503.42 [3][6][85]. Core Insights - The importance of shareholder returns has increased, with a focus on cash dividends and share buybacks, leading to a clearer financial improvement for Tencent [8][9]. - The expected shareholder return for 2024 is projected to be between 3.2% and 4.1% after tax, driven by increased cash dividends and share repurchases [9][24]. - The report anticipates that the growth rate of EPS will outpace that of net profit by 2.4 to 3.3 percentage points in 2024, due to significant share buybacks and high-margin new business contributions [9][34]. Summary by Sections 1. Quantifying Shareholder Returns - The dividend payout ratio has increased to approximately 18% over the past two years, with four special dividend distributions made [16][17]. - Share buybacks have significantly increased, with a record high of HKD 375 billion in Q2 2024, and a plan to double the buyback amount to over HKD 100 billion in 2024 [20][21]. - The dilution effect from equity incentives is estimated at about 0.6% annually [22]. 2. Sources of Cash Flow Stability - Tencent's competitive environment is relatively stable, with strong positions in gaming and payment sectors, leading to better cash flow than reported profits [40][41]. - The report notes a significant reduction in cash flow allocated to external investments since 2022, allowing for increased shareholder returns, which are expected to reach 62% to 78% of free cash flow in 2024 [40][54]. 3. Feasibility Analysis - The report highlights Tencent's strong market position and stable competitive landscape, which supports its cash flow and shareholder return potential [56][57]. - The company has a strong bargaining power and business selection ability, which enhances its profitability [62]. 4. Contributions from Joint Ventures - The profitability of core joint ventures is expected to improve, contributing positively to Tencent's financials [64]. - The report indicates that the pressure from major shareholder reductions has stabilized and can be offset by share buybacks [73]. 5. Valuation Discussion - The report suggests a shift in valuation metrics from revenue growth to EPS growth, with a target valuation of 18-20x PE for 2024 [85][88]. - The expected revenue for 2024 is projected at HKD 670.6 billion, with a year-on-year growth of 10% [90][91]. 6. Profit Forecast - The forecast for 2024-2026 includes revenues of HKD 670.6 billion, HKD 732.9 billion, and HKD 792.9 billion, with corresponding net profits of HKD 210.1 billion, HKD 234.9 billion, and HKD 259.8 billion [90][93].