Investment Rating - The report assigns a "Buy" rating with a target price of 660 HKD, indicating a potential upside of 28.4% from the last closing price of 514 HKD [5][49]. Core Insights - The company has demonstrated strong revenue growth driven by AI capabilities enhancing various business segments, including effective advertising and gaming [2][4]. - The first quarter of 2025 saw revenue reach 180 billion RMB, a year-on-year increase of 13% and a quarter-on-quarter increase of 4% [2][8]. - Non-GAAP operating profit was 69.3 billion RMB, reflecting an 18% year-on-year growth and an 11% quarter-on-quarter growth [2][8]. - The company is focusing on AI applications to improve operational efficiency and enhance advertising effectiveness, with significant investments in R&D and capital expenditures [4][12]. Summary by Sections Financial Performance - In Q1 2025, the company recorded a revenue of 180 billion RMB, with a year-on-year growth of 13% and a quarter-on-quarter growth of 4% [2][8]. - Non-GAAP net profit attributable to the parent company was 61.3 billion RMB, marking a 22% year-on-year increase [2][8]. - R&D investment increased by 21% year-on-year to 18.91 billion RMB, while capital expenditure rose by 91% to 27.48 billion RMB, focusing on computing infrastructure and large model development [2][12]. Gaming Business - The value-added services revenue reached 92 billion RMB in Q1 2025, a 17% year-on-year increase, with domestic game revenue growing by 24% [3][9]. - Key titles like "Honor of Kings" and "Peacekeeper Elite" continue to drive growth, alongside new games contributing significantly [3][9]. Marketing Services - Marketing services revenue was 31.9 billion RMB in Q1 2025, reflecting a 20% year-on-year increase, driven by the expansion of new traffic scenarios and advertising inventory [4][10]. - The integration of AI in advertising has improved efficiency and effectiveness, with video account advertising revenue increasing by over 60% [10][32]. Financial Technology and Enterprise Services - Financial technology and enterprise services revenue reached 55 billion RMB, a 5% year-on-year increase, supported by a recovery in wealth management and consumer loans [4][11]. - The introduction of large language models has enhanced service intelligence in financial technology [11]. Shareholder Returns - The company plans to distribute dividends of 41 billion HKD and repurchase at least 80 billion HKD, maintaining a strong balance between business growth and shareholder returns [13].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [4] Core Views - The company has exceeded revenue and profit expectations, with Q1 2025 revenue reaching 1800.2 billion yuan, a year-on-year increase of 12.9%, surpassing Bloomberg's consensus estimate of 1756.0 billion yuan. Non-IFRS net profit was 613.3 billion yuan, up 22.0% year-on-year, also exceeding expectations [2][14] - AI is making substantial contributions to the gaming and advertising industries, enhancing product differentiation and driving revenue growth [3][4] Summary by Sections Revenue and Profit Performance - Q1 2025 revenue was 1800.2 billion yuan, up 12.9% year-on-year, exceeding expectations [2][14] - Non-IFRS net profit for Q1 2025 was 613.3 billion yuan, reflecting a year-on-year increase of 22.0%, also above consensus estimates [2][14] Gaming Business - Online gaming revenue reached 595 billion yuan in Q1 2025, a 23.7% year-on-year increase, surpassing expectations [20] - Domestic gaming revenue was 429 billion yuan, up 24.3% year-on-year, while international gaming revenue was 166 billion yuan, up 22.1% year-on-year [21] Advertising Revenue - Advertising revenue for Q1 2025 was 319 billion yuan, a 20.4% year-on-year increase, exceeding expectations [24] - The growth in advertising revenue is attributed to increased user engagement, AI upgrades, and optimization of the WeChat ecosystem [24] Financial Technology and Enterprise Services - Financial technology and enterprise services revenue was 549 billion yuan in Q1 2025, a 5.0% year-on-year increase, slightly below expectations [28] - The growth in financial technology is driven by consumer loan services and wealth management services [28] Profitability Metrics - Overall gross margin for Q1 2025 was 56%, up 3 percentage points year-on-year, driven by high-margin revenue sources [33] - The gross margin for value-added services was 60%, reflecting growth in both domestic and international gaming revenue [33] Future Earnings Forecast - The report forecasts adjusted net profits of 2441 billion yuan, 2693 billion yuan, and 2984 billion yuan for 2025, 2026, and 2027 respectively, with corresponding PE ratios of 18, 16, and 14 times [4][43]

Core Viewpoint - The company reported strong Q1 2025 financial results, with total revenue of 180 billion yuan, a year-over-year increase of 13%, exceeding Bloomberg consensus by 3% [1] - Non-IFRS net profit reached 61.3 billion yuan, up 22% year-over-year, also surpassing Bloomberg consensus by 3% [1] Group 1: Gaming Business - Domestic and international gaming revenues exceeded expectations, with a record revenue growth of 24% year-over-year, totaling 59.5 billion yuan [1] - The domestic gaming market showed high growth, with revenue of 42.9 billion yuan, a 24% increase year-over-year, surpassing expectations by 7% [1] - Key games like "Honor of Kings" and "Peacekeeper Elite" achieved historical highs in revenue, while new game "Delta Force" showed strong user growth [1] Group 2: International Market - International gaming revenue reached 16.6 billion yuan, growing 23% year-over-year, exceeding expectations by 8% [2] - The growth was driven by Supercell's ongoing revenue increase and stable performance from existing products like PUBG Mobile and COD Mobile [2] - The company expects a similar revenue growth rate for the entire year of 2025, with a projected year-over-year increase of 10% [2] Group 3: Social Networking and Marketing Services - Social networking revenue was 32.6 billion yuan, a 7% year-over-year increase, meeting expectations [2] - Marketing services revenue reached 31.9 billion yuan, up 20% year-over-year, exceeding expectations by 3% due to increased user engagement and AI-driven advertising solutions [2] Group 4: Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services was 54.9 billion yuan, a 5% year-over-year increase, in line with expectations [3] - The growth was driven by improvements in cloud services and e-commerce transaction fees, with AI beginning to positively impact revenue [3] Group 5: Capital Expenditure - Capital expenditure (CAPEX) reached 23 billion yuan, a 60% year-over-year increase, accounting for 13% of revenue [3] - The high CAPEX is aligned with previous guidance and reflects the company's focus on optimizing cash flow through AI infrastructure investments [3] Group 6: AI Developments - The company released an upgraded image generation model, enhancing the speed and quality of generated content for advertising [4] - Ongoing updates in application scenarios are being explored, particularly in integrating AI features into existing platforms like WeChat [4] Group 7: Profit Forecast and Investment Recommendations - Revenue forecasts for 2025-2027 have been slightly adjusted to 728.6 billion, 784.5 billion, and 835.6 billion yuan, reflecting year-over-year growth of 10%, 8%, and 7% respectively [5] - Non-IFRS net profit forecasts for the same period are set at 256 billion, 288.6 billion, and 313.1 billion yuan, with expected year-over-year growth of 15%, 13%, and 9% [5] - The company maintains a "recommended" rating with a target price range of 545.69 to 606.33 Hong Kong dollars based on projected earnings [5]

Core Viewpoint - Company reported strong Q1 2025 financial results with revenue of 180 billion yuan, reflecting a year-over-year growth of 13% and a quarter-over-quarter growth of 4% [1] Group 1: Operational Data - WeChat's monthly active users (MAU) reached 1.402 billion, showing a year-over-year increase of 3% and a quarter-over-quarter increase of 1% [1] - QQ's active accounts slightly declined year-over-year, while the number of registered accounts for paid value-added services reached 268 million, up 3% year-over-year and 2% quarter-over-quarter [1] Group 2: Overall Performance - The overall gross margin improved to 55.8%, an increase of 3.24 percentage points year-over-year and 3.25 percentage points quarter-over-quarter [1] - Non-IFRS operating profit grew by 18% year-over-year, while Non-IFRS net profit increased by 22% to 61.3 billion yuan [1] Group 3: Value-Added Services - Game revenue accelerated with a 24% year-over-year growth, with domestic and overseas markets growing by 24% and 22% respectively [2] - Tencent Video maintained its leading position in the domestic long video market, with paid membership increasing by 1% year-over-year to 117 million [2] - Online music subscription revenue grew by 17% driven by increases in paid membership and ARPPU [2] Group 4: Marketing Services - Marketing services revenue grew by 20% year-over-year, supported by strong demand for key advertising placements within the WeChat ecosystem [2] - Upgrades to the AI advertising system improved ad click-through and conversion rates [2] Group 5: Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services grew by 5% year-over-year, with healthy growth in wealth management and consumer loan services [2] - Cloud business returned to double-digit growth due to increased demand for AI [2] Group 6: Capital Expenditure - Capital expenditure reached 27.5 billion yuan, a year-over-year increase of 91% [3] - AI and existing business operations continue to generate operational leverage [3] Group 7: Profit Forecast and Investment Rating - Revenue projections for 2025-2027 are set at 725.6 billion, 791.3 billion, and 863.1 billion yuan respectively, with Non-IFRS net profit estimates of 254.7 billion, 286.5 billion, and 321.8 billion yuan [4] - Target market capitalization for 2025 is set at 5.2 trillion yuan, corresponding to a target price of 617 HKD, maintaining a "buy" rating [4]

Investment Rating - The report assigns a positive investment rating to Tencent Holdings (00700.HK), indicating a potential upside in the stock price of approximately 20%-50% from the current levels, with a target price range of HKD 600-750 [27]. Core Insights - Tencent's Q1 2025 financial results exceeded market expectations, with total revenue reaching RMB 1800.22 billion, a year-on-year increase of 13%, and adjusted net profit of RMB 613.29 billion, up 22% year-on-year [2][27]. - The company's strong performance is driven by its leading position in domestic gaming and significant growth in international markets, alongside robust contributions from high-margin businesses such as advertising and cloud services [2][27]. - Tencent's strategic focus on AI technology is enhancing operational efficiency and driving revenue growth across various segments, including gaming and advertising [27]. Financial Performance - In Q1 2025, Tencent achieved a core net profit margin of 26.5% and a gross profit margin of 56%, both reaching historical peaks [2][5]. - The company reported a free cash flow of RMB 471 billion and maintained a strong cash reserve of RMB 2052.53 billion, reflecting a healthy financial position [5][27]. - Capital expenditures surged by 91% year-on-year to RMB 274.8 billion, primarily for AI-related infrastructure and model development [5][8]. Gaming Business - Tencent's value-added services revenue grew by 17% year-on-year, with domestic gaming revenue increasing by 24% to RMB 429 billion, driven by record-breaking performances of titles like "Honor of Kings" and "Peacekeeper Elite" [9][10]. - International gaming revenue reached RMB 166 billion, up 23% year-on-year, contributing 27.9% to total gaming revenue [10][27]. - The integration of AI technology in gaming operations has improved efficiency, with a 40% increase in scene building efficiency and enhanced player experiences through AI-driven features [12][15][16]. Advertising Business - Tencent's marketing services revenue rose by 20% year-on-year to RMB 318.53 billion, driven by explosive growth in video account advertising [18][27]. - The advertising segment is transitioning from "traffic monetization" to "technology empowerment," with significant contributions from AI-driven advertising systems [18][20]. - The company is optimizing its advertising structure, leading to improved conversion rates and increased user engagement across its platforms [19][20]. Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services reached RMB 549.07 billion, a 5% year-on-year increase, benefiting from a recovery in consumer spending and AI-driven enhancements in enterprise solutions [24][26]. - Tencent's cross-border payment services are expanding, with a 45% year-on-year increase in transaction volume, reflecting strong demand from Chinese tourists in Southeast Asia [25][26]. - The integration of AI in cloud services is driving significant growth, with a 60% year-on-year increase in AI-related cloud revenue [25][26]. Future Outlook - Tencent is expected to maintain a compound annual growth rate of over 20% in the gaming sector over the next two years, supported by the launch of cross-platform titles and a strategic push for international revenue [17][27]. - The company's AI strategy is anticipated to enhance its long-term growth potential, with a projected revenue growth of 8%-10% for 2025 [27].

Core Viewpoint - Tencent Holdings (00700.HK) repurchased 979,000 shares at a cost of HKD 504 million on May 19 [1] Group 1 - The total amount spent on the share buyback was HKD 504 million [1] - The number of shares repurchased was 979,000 [1]

Investment Rating - The investment rating for the company is "Buy (Maintain)" [1] Core Insights - The report highlights that the company's revenue and profit exceeded expectations, with AI capabilities beginning to deliver results [3] - The company is well-positioned in the FPS gaming sector, with significant growth in both domestic and international gaming revenues [4] - Advertising revenue has shown a notable increase due to AI enhancements, improving user engagement and ad click-through rates [4] - The financial technology and enterprise services segment is experiencing growth driven by cloud computing and AI capabilities [4] - Capital expenditures and operating expenses have increased significantly due to investments in AI [4] - The report maintains a positive outlook on the company's high-margin businesses and projects revenue and profit growth for the coming years [4] Financial Data Summary - **Revenue Projections**: Expected revenues for 2025, 2026, and 2027 are 749.1 billion, 823.9 billion, and 896.7 billion RMB respectively, with year-on-year growth rates of 13.5%, 10.0%, and 8.8% [4][7] - **Net Profit Projections**: Non-IFRS net profit is projected to be 259.4 billion, 284.7 billion, and 321.1 billion RMB for 2025, 2026, and 2027 respectively, with growth rates of 16.5%, 9.8%, and 12.8% [4][7] - **Gross Margin**: Expected gross margins are 56.4%, 58.0%, and 59.5% for the years 2025, 2026, and 2027 [4][6] - **Earnings Per Share (EPS)**: Non-IFRS EPS is projected to be 26.9, 29.6, and 33.4 RMB for 2025, 2026, and 2027 respectively [4][6] Key Financial Ratios - **Profitability**: Non-IFRS net profit margin is expected to be 34.6% for 2025 and remain stable thereafter [6] - **Liquidity**: The current ratio is projected to improve from 3.14 in 2025 to 3.88 in 2027 [6] - **Debt Management**: The debt-to-asset ratio is expected to remain low at around 0.3% across the forecast period [6]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [1][46] Core Insights - Tencent's Q1 2025 financial results show strong revenue growth driven by gaming and advertising, with significant operational leverage from AI integration [3][11][46] - The company achieved a revenue of 180 billion RMB in Q1 2025, representing a year-over-year increase of 13% and a quarter-over-quarter increase of 4% [12][17] - Non-IFRS net profit reached 61.3 billion RMB, up 22% year-over-year, indicating robust profitability [12][17] Summary by Sections Financial Performance - Q1 2025 revenue was 180 billion RMB, with operating profit at 57.6 billion RMB and net profit at 47.8 billion RMB [12][17] - The overall gross margin improved to 55.8%, up 3.24 percentage points year-over-year [17][22] - Non-IFRS operating profit grew by 18% year-over-year, reflecting effective cost management and revenue growth [12][17] Operational Data - WeChat's monthly active users (MAU) reached 1.402 billion, growing 3% year-over-year [8][13] - The number of registered accounts for value-added services increased to 268 million, a 3% year-over-year growth [8][13] Business Segments - Gaming revenue accelerated by 24% year-over-year, with domestic and international markets growing by 24% and 22% respectively [29][30] - Marketing services revenue grew by 20% year-over-year, driven by strong demand for advertising within the WeChat ecosystem [38][40] - Financial technology and enterprise services revenue increased by 5% year-over-year, with a notable recovery in cloud services [41][42] Future Projections - Revenue forecasts for 2025-2027 are set at 725.6 billion RMB, 791.3 billion RMB, and 863.1 billion RMB respectively [46] - Non-IFRS net profit projections for the same period are 254.7 billion RMB, 286.5 billion RMB, and 321.8 billion RMB [46] Capital Expenditure - Capital expenditure in Q1 2025 reached 27.5 billion RMB, a 91% increase year-over-year, reflecting investments in AI and core business operations [43][45]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [5] Core Views - Tencent's Q1 2025 revenue reached 180 billion RMB, a year-on-year increase of 13%, with a gross margin improvement from 53% to 56% driven by high-margin businesses such as WeChat Video Accounts and local games [1][3] - Non-GAAP net profit attributable to shareholders was approximately 61.3 billion RMB, reflecting a 22% year-on-year growth [1][3] - The report projects Tencent's revenue for 2025-2027 to be 735.8 billion, 801.6 billion, and 862.9 billion RMB respectively, with non-GAAP net profits of approximately 256.6 billion, 286.8 billion, and 314.9 billion RMB [3][12] Revenue Breakdown - Value-added services revenue for the quarter was 92.1 billion RMB, up 17% year-on-year, with local game revenue at 42.9 billion RMB, a 24% increase [1][2] - Financial technology and enterprise services revenue was 54.9 billion RMB, a 5% increase year-on-year [1] - Advertising revenue reached 31.9 billion RMB, growing 20% year-on-year, primarily driven by strong demand for Video Accounts and Mini Programs [1][2] Business Growth Drivers - The gaming business showed strong growth, with both local and international game revenues exceeding 20% growth, driven by popular titles [2] - Advertising growth was supported by AI-driven technology upgrades, significantly improving ad click-through rates [2] - Tencent's commitment to AI development is evident with a capital expenditure of 27.5 billion RMB and a 21% increase in R&D expenses [3] Financial Projections - The report forecasts Tencent's total revenue to grow at a CAGR of approximately 10% from 2023 to 2027, with a projected gross margin improvement [12] - Non-GAAP EPS is expected to rise from 16.4 RMB in 2023 to 34.0 RMB by 2027 [4][12] - The report anticipates a decrease in the P/E ratio from 28.6 in 2023 to 13.8 in 2027, indicating potential valuation improvement [4][12]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [6] Core Views - Tencent's Q1 2025 results exceeded expectations, driven by strong performance in gaming and advertising, supporting long-term AI investments [1] - The company is expected to leverage high-quality growth from existing businesses to enhance AI investments [1] Revenue and Profitability - Total revenue for Q1 2025 was 180 billion RMB, a year-on-year increase of 13% - Gross profit reached 100.5 billion RMB, with a gross margin of 55.8%, up 3 percentage points year-on-year - Non-IFRS operating profit was 69.3 billion RMB, an 18% increase year-on-year, with an adjusted operating margin of 38.5% [1] - Non-IFRS net profit was 61.3 billion RMB, a 22% increase year-on-year, with an adjusted net margin of 34.1%, up 3 percentage points [1] Business Segments Value-Added Services - Revenue from value-added services was 92.1 billion RMB, a 17% year-on-year increase - Domestic gaming revenue was 42.9 billion RMB, up 24% year-on-year, with significant contributions from long-standing games [2] - International gaming revenue was 16.6 billion RMB, a 23% increase year-on-year, driven by popular titles [2] - Social network revenue was 32.6 billion RMB, a 7% increase year-on-year, with music subscription revenue growing by 17% [2] Marketing Services - Marketing services revenue was 31.9 billion RMB, a 20% year-on-year increase, benefiting from enhanced user engagement and AI upgrades [3] - Significant growth in WeChat's marketing services, particularly from video accounts and mini-programs [3] Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services was 54.9 billion RMB, a 5% year-on-year increase, with notable growth in cloud services and AI-related income [4] Financial Forecast - Projected revenues for 2025, 2026, and 2027 are 735.9 billion RMB, 803.3 billion RMB, and 878.2 billion RMB respectively - Non-IFRS net profits for the same years are expected to be 260 billion RMB, 280.9 billion RMB, and 309.2 billion RMB respectively [4][5]