Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700) with a target price of 404.2 HKD [1] Core Views - Tencent's 3Q2024 revenue increased by 8% YoY, with Non-IFRS operating profit up 19% YoY, showing a multiplier effect where profit growth outpaces revenue growth [1] - Non-IFRS net profit attributable to shareholders rose 33% YoY, exceeding Bloomberg estimates by 10% [1] - The company's gross margin improved by 3.6 percentage points YoY, while operating expenses increased by 12% YoY, slightly above expectations but still at a relatively low rate [1] Business Segments Online Games - Online game revenue grew 13% YoY in 3Q2024, driven by domestic titles such as "Valorant," "Honor of Kings," "Peacekeeper Elite," and "Dungeon & Fighter: Origin" [1] - Domestic game revenue increased 14% YoY, slightly above expectations, while overseas game revenue grew 9% YoY (11% on a constant currency basis), slightly below expectations [1] - The company expects game revenue growth to accelerate further in 4Q2024, with a focus on the integration of "Dungeon & Fighter: Origin" and a major content update planned for the Chinese New Year [1] Advertising Services - Advertising revenue increased 17% YoY in 3Q2024, in line with expectations, driven by growth in gaming and e-commerce ad spending [1] - Video ad revenue grew over 60% YoY, with ad load rates still significantly lower than peers, indicating room for further inventory expansion [1] - Search ad revenue grew over 100% YoY, benefiting from improved search relevance through LLM capabilities [1] Fintech and Business Services (FBS) - FBS revenue grew 2% YoY in 3Q2024, in line with expectations but slightly below Bloomberg estimates [1] - Payment TPV growth rebounded in October, with GPU-related cloud revenue now accounting for a double-digit percentage of IaaS cloud revenue, indicating growing contributions from AI-driven computing demand [1] Investment Recommendation - The report raises the forecast for Non-IFRS net profit attributable to shareholders for 2024-2026 to 2281/2649/2940 billion yuan (previously 2178/2517/2786 billion yuan), representing YoY growth of 45%/16%/11% [1] - As of 2024/11/17, Tencent's stock price corresponds to 2024/2025/2026 forecast P/E ratios of 15x/12x/11x, with the 12-month Bloomberg forward P/E below the 5-year median by 1.1 standard deviations, indicating relatively low valuation [1] - The report expects accelerated game growth, improved advertising and financial services performance, and potential share buybacks to support valuation recovery, maintaining a "Buy" rating [1]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [5] Core Views - Tencent's Q3 2024 revenue reached RMB 167.19 billion, representing a year-over-year increase of 8% and a quarter-over-quarter increase of 4%. The gross margin was 53%, up 4 percentage points year-over-year but down 0.2 percentage points quarter-over-quarter [2] - The net profit attributable to shareholders (IFRS) for Q3 2024 was RMB 53.23 billion, a significant year-over-year increase of 47% and a quarter-over-quarter increase of 12%. The non-IFRS net profit was RMB 59.81 billion, up 33% year-over-year and 4% quarter-over-quarter [2] - The report anticipates continued growth in gaming revenue, driven by a low base in Q4 2023 and the longer revenue recognition cycle for overseas income. The gaming revenue is expected to maintain its growth momentum into Q1 2025 [2][3] Summary by Sections Financial Performance - Q3 2024 value-added services revenue was RMB 82.70 billion, up 9% year-over-year and 5% quarter-over-quarter. International gaming revenue was RMB 14.5 billion, also up 9% year-over-year, while domestic gaming revenue was RMB 37.3 billion, up 14% year-over-year [2] - Social network revenue grew by 4% to RMB 30.9 billion, supported by mobile game virtual item sales and music subscription revenue, although partially offset by declines in music and game live streaming services [2] - Q3 2024 advertising revenue was RMB 30 billion, a 17% year-over-year increase, driven by strong demand for advertising inventory from video accounts, mini-programs, and WeChat search [2] Future Projections - The report projects IFRS net profits for 2024, 2025, and 2026 to be RMB 195.13 billion, RMB 224.53 billion, and RMB 249.81 billion respectively, with non-IFRS net profits expected to be RMB 228.64 billion, RMB 261.49 billion, and RMB 291.44 billion [3] - The target price is set at HKD 528.62, with a current share price of HKD 404.2 [5]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [1] Core Insights - The company reported a significant profit exceeding expectations, with a notable increase in gross margin by 6.85 percentage points in its financial technology segment [1][4] - Revenue growth remains strong, with a year-over-year increase of 12.1% in Q3 2024, reaching 167.2 billion RMB, although slightly below Bloomberg consensus expectations [1][20] - Non-IFRS net profit for the same quarter was 59.813 billion RMB, reflecting a year-over-year growth of 33.2%, surpassing Bloomberg consensus [1][20] Summary by Sections Revenue Growth and Profitability - The company achieved total revenue of 167.2 billion RMB in Q3 2024, a year-over-year increase of 12.1%, slightly below the expected 167.9 billion RMB [1][20] - The non-IFRS net profit was 59.813 billion RMB, up 33.2% year-over-year, exceeding the expected 54.4 billion RMB [1][20] Gaming Performance - Domestic gaming revenue reached 37.3 billion RMB, growing 14.1% year-over-year, while international gaming revenue was 14.5 billion RMB, up 9% year-over-year [2][24] - The growth in international gaming was driven by strong performances from titles like PUBG MOBILE and VALORANT, which saw a 30% increase in revenue [2][24] Advertising Revenue - Advertising revenue was 30 billion RMB, reflecting a year-over-year increase of 17%, driven by strong demand from advertisers on various platforms [3][30] - The gross margin for advertising increased to 52.99%, up 0.71 percentage points year-over-year [3][30] Financial Technology and Enterprise Services - Financial technology and enterprise services revenue was 53.1 billion RMB, a 2% year-over-year increase, although below the expected 54.1 billion RMB [3][34] - The gross margin for this segment improved to 47.79%, up 6.85 percentage points year-over-year, driven by growth in wealth management services [3][34] Operational Data Growth - The combined monthly active users (MAU) for WeChat reached 1.382 billion, a 3% year-over-year increase, while QQ's MAU was 571 million, a 1% increase [3][36] Margin Improvement - Overall gross margin for Q3 2024 was 53.36%, up 3.87 percentage points year-over-year, attributed to growth in high-margin revenue sources [3][40] - The gross margin for value-added services was 57.45%, reflecting growth in both domestic and international gaming revenues [3][40] Expense Trends - Sales expenses increased by 18.9% year-over-year, primarily due to increased marketing efforts for new games [3][42] - Management expenses rose by 10.5% year-over-year, driven by higher R&D and employee costs [3][42] Earnings Forecast and Rating - The adjusted net profit forecast for 2024-2026 was raised to 217.4 billion, 240.6 billion, and 265.3 billion RMB respectively, with corresponding PE ratios of 16, 14, and 13 times [4][47] - The report emphasizes the company's strong business moat and ecosystem, maintaining the "Buy" rating [4][47]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [5] Core Views - Tencent's Q3 2024 revenue reached RMB 167.19 billion, representing a year-over-year increase of 8% and a quarter-over-quarter increase of 4%. The gross margin was 53%, up 4 percentage points year-over-year but down 0.2 percentage points quarter-over-quarter [2][3] - The net profit attributable to shareholders (IFRS) for Q3 2024 was RMB 53.23 billion, a significant year-over-year increase of 47% and a quarter-over-quarter increase of 12%. The non-IFRS net profit was RMB 59.81 billion, up 33% year-over-year and 4% quarter-over-quarter [2][3] - The report anticipates continued growth in gaming revenue, driven by a low base in Q4 2023 and the expected performance of new game versions in early 2025 [2][3] Summary by Sections Revenue Breakdown - Value-added services revenue for Q3 2024 was RMB 82.70 billion, up 9% year-over-year and 5% quarter-over-quarter. International gaming revenue was RMB 14.5 billion, also up 9% year-over-year, while domestic gaming revenue was RMB 37.3 billion, up 14% year-over-year [2] - Social network revenue grew by 4% to RMB 30.9 billion, supported by mobile game virtual item sales and music subscription revenue, although offset by declines in music and game live streaming services [2] Advertising and Financial Services - Online advertising revenue for Q3 2024 was RMB 30.0 billion, a 17% increase year-over-year, driven by strong demand for advertising inventory from video accounts, mini-programs, and WeChat search [2] - Financial technology and enterprise services revenue was RMB 53.09 billion, up 2% year-over-year and 5% quarter-over-quarter, with growth in wealth management services offset by a decline in payment services due to weak consumer spending [2] Profit Forecast and Valuation - The report projects IFRS net profit for 2024-2026 to be RMB 195.13 billion, RMB 224.53 billion, and RMB 249.81 billion respectively, with non-IFRS net profit expected to be RMB 228.64 billion, RMB 261.49 billion, and RMB 291.44 billion [3] - A sum-of-the-parts (SOTP) valuation method is used, resulting in a target price of HKD 528.62, maintaining the "Buy" rating [3]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [5] Core Views - Tencent reported a revenue of 167.2 billion RMB for Q3 2024, representing an 8% year-on-year increase. The adjusted net profit attributable to shareholders was approximately 59.8 billion RMB, a significant 33% increase compared to the previous year, exceeding Bloomberg's consensus estimate of 54.4 billion RMB [2][4] - The gaming sector is experiencing a strong product cycle, with domestic game revenue increasing by 14% to 37.3 billion RMB, driven by titles such as "Valorant," "Honor of Kings," and "Peacekeeper Elite." International game revenue grew by 9% to 14.5 billion RMB, supported by strong performances from "PUBG MOBILE" and "Brawl Stars" [3] - The advertising revenue saw a 17% increase to 30 billion RMB, fueled by strong demand for ads on video accounts, mini-programs, and WeChat search, along with the branding boost from the Olympics [4] Summary by Sections Financial Performance - Q3 2024 revenue breakdown: Gaming (51.8 billion RMB), Social Networks (30.9 billion RMB), FinTech and Enterprise Services (53.1 billion RMB), Advertising (30 billion RMB) [2] - Adjusted net profit for Q3 2024 was 59.8 billion RMB, with significant contributions from equity method investments and a reduced effective tax rate of 14% [2][3] Business Segments - Gaming: Domestic revenue increased by 14% to 37.3 billion RMB, while international revenue grew by 9% to 14.5 billion RMB. The company expects higher international game revenue to reflect in Q4 and next year's figures [3] - FinTech and Enterprise Services: Revenue growth slowed, with payment transaction volume increasing by about 10%, but average transaction value declined [3] - Advertising: Revenue increased by 17% to 30 billion RMB, with significant growth potential in video account ads and WeChat search ads [4] Future Projections - Revenue forecasts for 2024-2026 are 657.3 billion RMB, 702.3 billion RMB, and 752.0 billion RMB, respectively. Non-GAAP net profit estimates are approximately 223.5 billion RMB, 243.1 billion RMB, and 266.2 billion RMB for the same period [4][8]

Investment Rating - The investment rating for the company is "Buy" (maintained) [2] Core Views - The report highlights that Q3 revenue was 167.19 billion (YoY +8.1%, QoQ +3.8%), slightly below consensus expectations [2] - Gross profit reached 88.83 billion (YoY +16.1%, QoQ +3.4%), also slightly below consensus [2] - Net profit was 53.23 billion (YoY +47.1%, QoQ +11.8%), exceeding consensus by 17.4% [2] - The report emphasizes stable growth in domestic long-term games and incremental growth from overseas games, with domestic game revenue at 37.3 billion (YoY +14%) driven by titles like "Valorant" and "Honor of Kings" [2] - Marketing business revenue was 30 billion (YoY +16.6%), surpassing consensus expectations [2] Summary by Sections Financial Performance - Q3 revenue was 167.19 billion, slightly missing consensus by 0.4% [2] - Gross profit was 88.83 billion, missing consensus by 0.8% [2] - Net profit was 53.23 billion, beating consensus by 17.4% [2] - The company expects net profits (Non-IFRS) for 2024/25/26 to be 220.80 billion, 238.91 billion, and 260.27 billion respectively [2] Business Segments - Value-added services (VAS) showed a gross margin of 57.5%, exceeding Bloomberg consensus of 56.7% due to growth in gaming revenue [2] - Marketing business gross margin was 53%, below Bloomberg consensus of 56% [2] - Financial technology revenue was 53.1 billion (YoY +2%), slightly below consensus of 54.06 billion [2] Future Outlook - The report anticipates continued growth in gaming and advertising, maintaining a "Buy" rating based on the company's long-term competitive advantages [2]

Investment Rating - The report maintains a "Buy" rating with a target price of HKD 520.00, representing a potential upside of approximately 28.8% from the current price of HKD 403.80 [2][17]. Core Insights - The report highlights strong growth in the gaming sector, particularly in domestic games, driven by titles such as "Dungeon & Fighter Mobile" and other flagship games, with a projected 4Q24 year-on-year growth of 16% for both domestic and international games [2][14]. - The advertising segment continues to show robust growth, with a year-on-year increase of 17%, supported by WeChat features [2][10]. - The report notes a significant increase in net profit, with a year-on-year growth of 33% in 3Q24, surpassing previous forecasts [2][10]. Financial Performance Summary - The total net revenue for 3Q24 was RMB 167.19 billion, reflecting an 8% year-on-year increase [10]. - The gaming revenue for 3Q24 reached RMB 51.80 billion, with a 13% year-on-year growth, and domestic games grew by 14% [10]. - The report projects a total revenue of RMB 658.95 billion for 2024, with a slight adjustment reflecting a 0% change from previous estimates [15]. Revenue Breakdown - Domestic mobile game revenue is expected to reach RMB 131.79 billion in 2024, showing a 9.5% year-on-year increase [8]. - The report indicates that the advertising segment's gross margin has slightly decreased, while the overall revenue structure is shifting towards higher-margin businesses [14][15]. - The financial technology and enterprise services segment is projected to grow by 2% year-on-year in 4Q24, indicating a stable performance despite market challenges [10][14]. Earnings Per Share (EPS) Forecast - The report updates the EPS forecast for 2024 to RMB 22.82, reflecting a 1% increase from previous estimates [2][15]. - For 2025, the EPS is projected to be RMB 25.46, a 3% increase from earlier forecasts [2][15]. - The 2026 EPS forecast is set at RMB 28.32, also reflecting a 3% increase [2][15].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [1] Core Insights - Tencent's Q3 2024 revenue reached 167.2 billion RMB, representing an 8% year-over-year increase and a 4% quarter-over-quarter increase. Operating profit was 53.3 billion RMB, up 20% year-over-year and 5% quarter-over-quarter. Net profit attributable to shareholders was 53.2 billion RMB, reflecting a 47% year-over-year increase and a 12% quarter-over-quarter increase [1][11][18] - The gaming revenue accelerated with a 13% year-over-year growth, driven by both domestic (14%) and international (9%) markets. The deferred revenue reached a record high, indicating strong future revenue potential [30][31] - The marketing services business grew by 17% year-over-year, supported by demand for advertising on platforms like WeChat and mini-programs, demonstrating resilience in the advertising sector despite macroeconomic pressures [47][48] Summary by Sections Financial Performance - Q3 2024 overall gross margin increased by 3.6 percentage points year-over-year, remaining stable quarter-over-quarter. Non-IFRS operating profit grew by 19% year-over-year, while Non-IFRS net profit increased by 33% to 59.8 billion RMB [18][22] - Free cash flow for the quarter was 58.5 billion RMB, significantly up from 40.4 billion RMB in the previous quarter, indicating strong cash generation capabilities [27] Business Segments Value-Added Services - Gaming revenue for Q3 2024 was 51.8 billion RMB, accounting for 31% of total revenue, with a year-over-year growth of 13%. The deferred revenue balance reached 113.1 billion RMB, a 23% increase year-over-year [30][31] - The social network segment reported a 4% year-over-year increase in revenue, driven by sales of virtual goods and subscription services [41] Marketing Services - Marketing services revenue increased to 30 billion RMB, a 17% year-over-year growth, driven by demand for video ads and mini-programs [47] - The video account advertising revenue saw over 60% year-over-year growth, indicating strong demand and potential for further monetization [48] Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services grew by 2% year-over-year to 53.1 billion RMB, with growth in wealth management services offsetting declines in payment services due to weak consumer spending [49] - The cloud business is expected to continue growing, supported by the launch of new AI models and improved operational efficiencies [49][52] Shareholder Returns - Tencent plans to repurchase over 100 billion HKD worth of shares in 2024, which, along with cash dividends, is expected to provide strong support for the stock price [53] Earnings Forecast - The report projects revenues for FY2024-2026 to be 654.5 billion RMB, 699.1 billion RMB, and 747.9 billion RMB respectively, with Non-IFRS net profits of 223.3 billion RMB, 251.8 billion RMB, and 275 billion RMB [54]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [11][13]. Core Insights - Tencent's Q3 2024 revenue reached 167.2 billion RMB, a year-on-year increase of 8%, aligning with consensus expectations. Adjusted net profit was 59.8 billion RMB, up 33% year-on-year, exceeding consensus by 10% [11]. - The report highlights that domestic game revenue grew by 14% year-on-year, while overseas game revenue increased by 9% [8]. - Advertising revenue saw a 17% year-on-year growth, driven by the performance of video accounts and AI enhancements [9]. - Financial technology and enterprise services revenue grew by 2% year-on-year, with payment income declining but expected to recover partially in Q4 [12]. - The report emphasizes Tencent's strong fundamentals, competitive landscape, and growth drivers from gaming and AI, with a target market capitalization adjustment from 47,190 billion RMB to 48,013 billion RMB, corresponding to a target price of 560 HKD [13]. Financial Summary - Revenue projections for Tencent are as follows: - 2022: 554.6 billion RMB - 2023: 609 billion RMB - 2024E: 657.9 billion RMB - 2025E: 723.4 billion RMB - 2026E: 780.3 billion RMB [7][19] - Adjusted net profit forecasts are: - 2024E: 224.7 billion RMB - 2025E: 245.1 billion RMB - 2026E: 280.3 billion RMB [7][19]. - The report indicates a significant increase in deferred revenue, with a year-on-year growth of 93% for non-current liabilities [8].

Investment Rating - The report assigns a rating of "Buy" for Tencent Holdings (0700) [1]. Core Insights - The third-quarter business performance is generally in line with expectations, with a recovery in gaming, smooth commercialization of video accounts, and short-term pressure on enterprise services. The company is expected to maintain high profit growth for the full year [3]. - The report anticipates that the integration of video accounts and WeChat stores will further enhance the WeChat ecosystem, driving advertising business growth. Deferred revenue from games is expected to gradually materialize, and enterprise services are likely to benefit from ecosystem openness [5]. Financial Summary - For FY24Q3, Tencent achieved operating revenue of 167.2 billion RMB, a year-on-year increase of 8.13%, which is in line with consensus expectations (167.9 billion RMB). Adjusted net profit reached 59.8 billion RMB, a year-on-year increase of 33.2%, significantly exceeding market expectations (54.4 billion RMB) [5]. - The gross profit margin for FY24Q3 was 53.1%, with year-on-year and quarter-on-quarter changes of +3.64% and -0.18%, respectively. The slight decline in the quarter was mainly due to a 2.65 percentage point decrease in advertising gross margin [5]. - The company expects to repurchase over 100 billion HKD worth of shares for the full year [5]. Segment Performance - Value-added services (VAS) revenue for FY24Q3 was 82.7 billion RMB, a year-on-year increase of 9.2%, with gaming revenue at 51.8 billion RMB, up 12.6%. Domestic and international gaming revenues were 37.3 billion RMB and 14.5 billion RMB, respectively [5]. - Social network revenue reached 30.9 billion RMB, a year-on-year increase of 3.9%, meeting expectations [5]. - Advertising revenue for FY24Q3 was 30 billion RMB, a year-on-year increase of 16.6%, with video account advertising revenue growing over 60% year-on-year [5]. - Enterprise services revenue for FY24Q3 was 53.1 billion RMB, a year-on-year increase of 2%, showing slower growth mainly due to overall macroeconomic impacts [5]. Operational Data - The WeChat ecosystem remains robust, with VAS paid user growth showing positive momentum. The number of WeChat and WeChat MAUs increased by 3% year-on-year [31]. - The number of paid accounts for value-added services increased by 9% year-on-year [31].