Shenzhen, China, June 25, 2024 (GLOBE NEWSWIRE) -- On June 24th, TENCENT E-SPORTS launched a special live broadcast with the theme "Empower Esports Worldwide". Mars Hou, the general manager of TENCENT E-SPORTS, stated during the live broadcast that riding the wave of globalization, esports has gained influence among an increasingly broad demographic and has consequently garnered recognition and support from numerous countries and organizations worldwide. The development of industries does not follow a linea ...

Investment Rating - The report maintains an "Outperform the Market" rating for Tencent Holdings [14][36][21] Core Insights - The removal of DNF mobile game from certain Android app stores is expected to enhance profit margins for Tencent, as it reduces channel sharing costs [12][18] - DNF mobile game has shown strong performance, topping the iOS sales chart for 31 consecutive days and achieving an estimated revenue of 5 billion yuan in its first month [13][29] - The gaming industry is transitioning from a "channel-driven" model to a "content-driven" model, with high-quality content becoming the key to attracting players [13][25] Summary by Sections Company Overview - Tencent's DNF mobile game has successfully transitioned to a direct download model, avoiding high channel fees associated with traditional Android app stores [11][12] - The game has outperformed major competitors, generating significant revenue shortly after launch [13][29] Market Dynamics - The Android gaming market is characterized by high revenue sharing costs, with major manufacturers like Huawei, OPPO, and Vivo setting a 50% revenue share for developers [3][12] - The trend of avoiding traditional app stores is gaining traction, as evidenced by other successful games like Genshin Impact, which also opted out of certain Android channels [27][25] Financial Projections - The report projects Tencent's adjusted net profits for 2024, 2025, and 2026 to be 229.9 billion, 257.9 billion, and 279.9 billion yuan respectively, reflecting an upward adjustment in profit expectations [14][36] - The anticipated growth in revenue is supported by the strong performance of new game titles and the company's ability to leverage its existing IPs [14][36]

Investment Rating - The investment rating for Tencent Holdings (0700.HK) is "Buy" [2]. Core Insights - Tencent reported a revenue of 159.5 billion yuan for Q1 2024, representing a year-over-year increase of 6%. Gross profit reached 83.9 billion yuan, up 23% year-over-year, with a gross margin of 52.6%. Net profit attributable to shareholders was 41.9 billion yuan, reflecting a 62% year-over-year increase [2][4]. Summary by Sections Business Performance - Value-added services generated revenue of 78.6 billion yuan, down 1% year-over-year. Social network revenue decreased by 2% to 30.5 billion yuan, primarily due to declines in music and long video subscriptions, although revenue from video live streaming and mini-games increased. Domestic game revenue fell by 2% to 34.5 billion yuan, impacted by declines in "Honor of Kings" and "Peacekeeper Elite," but offset by strong growth from new games. International game revenue grew by 3% to 13.6 billion yuan, with a 34% increase in gross revenue [2][4][5]. Advertising and E-commerce - Online advertising revenue increased by 26% year-over-year to 26.5 billion yuan, driven by enhanced user engagement and AI-driven advertising infrastructure. Video account advertising revenue more than doubled, benefiting from increased video views and click-through rates. E-commerce revenue from video accounts is expected to grow significantly, with the GMV projected to reach around 100 billion yuan in 2023 [4][9][10]. Financial Technology and Enterprise Services - Financial technology and enterprise services generated revenue of 52.3 billion yuan, up 7% year-over-year. The growth in wealth management services was strong, while payment services faced slow growth due to reduced offline spending. Enterprise services saw a significant increase in gross margin, driven by higher profit margin revenue sources and improved operational efficiency [10]. Future Outlook - The report anticipates that the gaming business will stabilize and see revenue growth rebound with the launch of new games. The advertising and financial technology sectors are expected to maintain healthy growth, with overall gross margins reaching new highs. The company plans to continue enhancing shareholder returns through stock buybacks and dividends, which are expected to support the stock price [11][12]. Financial Projections - Revenue projections for FY2024-2026 are 666.6 billion yuan, 724.7 billion yuan, and 779.0 billion yuan, respectively, with year-over-year growth rates of 9.5%, 8.7%, and 7.5%. Non-IFRS net profit is projected to be 208.0 billion yuan, 244.3 billion yuan, and 269.7 billion yuan, reflecting growth rates of 31.9%, 17.5%, and 10.4% [12].

Investment Rating - The report maintains a "Strong Buy" rating for Tencent Holdings, indicating an expected return exceeding 15% relative to market benchmarks [8][19]. Core Insights - Tencent's revenue for Q1 2024 reached 159.5 billion yuan, reflecting a year-on-year growth of 6%, with a significant increase in Non-IFRS net profit by 54% to 50.27 billion yuan [20][21]. - The company is experiencing a recovery in its advertising business, driven by increased user engagement across platforms like WeChat and video accounts, contributing to a 26% year-on-year growth in advertising revenue [19][21]. - The report highlights Tencent's strong performance in AI and cloud services, with ongoing investments in AI capabilities and infrastructure, which are expected to support future growth [2][21]. Financial Performance Summary - Revenue from financial technology and enterprise services was 52.3 billion yuan, up 7% year-on-year, with strong growth in wealth management services [1]. - The company's gross margin improved to 52.6%, up 7.1 percentage points year-on-year, driven by increased revenue from video and advertising services [21]. - Forecasted net profits for 2024-2026 are projected at 171.6 billion yuan, 188.9 billion yuan, and 209.7 billion yuan, respectively, with corresponding PE ratios of 19X, 17X, and 16X [2][34]. User Engagement and Growth Metrics - User engagement metrics show over 80% growth in usage time for video services, with a 30% increase in revenue from mini-games [2][24]. - Monthly active users for WeChat and WeChat combined reached 1.359 billion, marking a 3% increase year-on-year [24]. Revenue Breakdown - The report indicates a decline in value-added services revenue to 78.63 billion yuan, down 0.9% year-on-year, primarily due to a decrease in domestic game revenue [19]. - Advertising revenue reached 26.5 billion yuan, up 26% year-on-year, attributed to the recovery in domestic consumption and increased advertising spending [19].

Core Insights - Tencent Holdings maintains a leading position in the Chinese gaming, social networks, and tech sectors, with non-value-added services (non-VAS) now constituting the majority of revenue and experiencing healthy growth [2][3] - Domestic gaming presents potential upside if regulatory pressures ease, which could unlock suppressed demand [10][11] - Tencent's international gaming segment has shown resilience, offsetting stagnation in domestic gaming, while the company navigates structural headwinds effectively [3][10] Revenue and Growth - Value-added services revenue has shown fluctuations, with a YoY increase of 8.65% in Q1 2023, following a decline in previous quarters [5] - The combined monthly active users (MAUs) of Weixin and WeChat reached 1,327 million in Q2 2023, reflecting a growth of 2.16% [5] - The fintech and business services segments are growing rapidly, contributing to revenue diversification and gross margin expansion [6][8] Market Position and Competition - Tencent is the world's largest gaming company by revenue and leads in paid subscriptions for video, music, and literature in China [3] - The online advertising segment has rebounded strongly, with a 26% YoY revenue growth driven by AI-powered ad targeting [14] - Despite competitive pressures in the cloud segment, Tencent's exposure is estimated to be less than 8% of total group revenue, mitigating potential impacts from price wars [14] Financial Health - Tencent has committed to HKD 100 billion in buybacks for 2024, representing nearly 3% of its market cap, alongside a low but growing dividend [15] - The company maintains a solid balance sheet with approximately RMB 100 billion in net cash after accounting for gross debt of RMB 352 billion [15] Future Prospects - The domestic gaming market, which is currently constrained by regulations, could see significant growth if restrictions are lifted, presenting upside optionality [10][13] - The international gaming segment is expected to grow at a 14% revenue CAGR, providing additional growth avenues [13] - Overall, Tencent's diversification into fintech and business services, along with improvements in online advertising, positions the company favorably for future growth [14][17]

Investment Rating - The report assigns an "Accumulate" rating to the company [2]. Core Insights - The launch of the Tencent Yuanbao app marks Tencent's entry into the consumer AI assistant market, leveraging its content ecosystem advantages [10][15]. - The upgraded mixed Yuan model enhances the app's capabilities, supporting various input formats and providing high-quality AI search experiences [11][31]. - The report maintains the profit forecast for 2024-2025, projecting a non-IFRS net profit of 196.2 billion and 221.9 billion RMB for those years, respectively [11]. Financial Summary - Revenue for 2023 is projected at 609.015 billion RMB, with a growth rate of 9.8% compared to 2022 [4]. - Gross profit is expected to reach 293.109 billion RMB in 2023, with a significant increase in net profit to 157.688 billion RMB, reflecting a growth of 36.4% [4]. - The company's PE ratio is projected to decrease from 26.6 in 2023 to 15.7 in 2024, indicating a favorable valuation trend [4]. Product Development - The Tencent Yuanbao app features advanced AI capabilities, including AI search, document summarization, and personalized assistant creation [15][31]. - The mixed Yuan model supports a context window of 256k, allowing it to process extensive text inputs effectively [11][16]. - The app integrates with Tencent's ecosystem, enhancing its content recommendation capabilities, which is a competitive advantage over similar products [11][33]. Market Outlook - The report anticipates a 21.6% upside potential for the stock price, with a target price set at 459 HKD, corresponding to a PE ratio of 20x for 2024 [11].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700.HK) with a target price of 464.88 HKD, based on a 20x PE for the 2024 NON-IFRS net profit [7][12][30]. Core Insights - The report highlights that Tencent's gaming segment is expected to recover, driven by Supercell's performance and the introduction of new gameplay modes in existing titles like "Peacekeeper Elite" [7][30]. - The anticipated launch of the "Metro Royale" mode in "Peacekeeper Elite" is expected to enhance user engagement and revenue generation [7][30]. - The report emphasizes that Supercell is entering a new expansion phase, with significant revenue growth projected for the coming years [16][30]. Summary by Sections Company Research - Tencent's overseas gaming revenue is significantly supported by Supercell, which contributes approximately 24% of Tencent's overseas gaming income [34]. - Supercell's revenue for 2023 was approximately 12.8 billion RMB, showing a year-over-year stability despite currency fluctuations [34][35]. Financial Projections - The revenue forecast for Tencent from 2024 to 2026 has been adjusted to 674.1 billion, 737.7 billion, and 796.2 billion RMB respectively, reflecting year-over-year growth rates of 11%, 9%, and 8% [7][30]. - The projected NON-IFRS net profit for the same period is set at 199.3 billion, 220.3 billion, and 239.3 billion RMB, with year-over-year growth rates of 26%, 11%, and 9% [7][30]. Game Performance - "Brawl Stars" has recently entered the global revenue top 10, indicating a potential acceleration in game revenue growth [9][30]. - The report notes that the introduction of new gameplay mechanics and operational enhancements has led to a resurgence in "Brawl Stars," with a projected revenue increase of 105% for 2024 [30][49]. Market Trends - The report discusses the evolution of shooting games and how new gameplay paradigms, such as the "Tarkov-like" mode, could expand the market and user base for mobile shooters [7][30]. - The anticipated performance of "Squad Busters," Supercell's first new product in nearly six years, is expected to positively impact revenue, having already topped the free charts in initial launch markets [60].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings, with a target price of HKD 464.88 based on a 20x PE for the 2024 NON-IFRS net profit [24]. Core Insights - The report highlights that Supercell's performance, particularly with "Brawl Stars," has been underestimated, and it is expected to drive a sequential acceleration in game revenue [10][24]. - The anticipated launch of "Squad Busters" is expected to perform well based on its initial success in test markets [59]. - The report suggests that Tencent's strong user base from games like "Honor of Kings" and "Peacekeeper Elite" has positively influenced Supercell's operational adjustments [48]. Summary by Sections Revenue and Profit Forecast - The report projects total revenue for Tencent to reach CNY 674.1 billion in 2024, with a year-over-year growth of 10.7% [23]. - The expected net profit attributable to the parent company is forecasted to be CNY 160.9 billion in 2024, reflecting a significant recovery from a decline in 2023 [23][24]. Game Performance - "Brawl Stars" entered the global top 10 revenue rankings in April 2024, indicating a strong market position and potential for further growth [10][28]. - The report notes that Supercell's revenue is expected to grow significantly, driven by the performance of "Brawl Stars" and other titles, with international market revenue projected to reach CNY 627 billion by 2026 [74]. Operational Changes - The report emphasizes that Supercell's operational capacity has improved due to team expansion, which has allowed for better management of existing products [35][48]. - The introduction of new gameplay mechanics in "Brawl Stars" has led to a resurgence in user engagement and retention metrics [34][48]. Market Trends - The report discusses the evolution of shooting games and highlights the potential of the "Metro Royale" gameplay to enhance user experience in "Peacekeeper Elite" [63][67]. - It also notes the increasing popularity of mobile gaming and the opportunities for Tencent to leverage its existing user base to drive growth in Supercell's titles [48][67].

Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [1][2]. Core Insights - The launch of Tencent's C-end APP "Tencent Yuanbao," based on the mixed Yuan model, aims to enhance user efficiency in information retrieval, processing, and production, featuring AI search, AI summarization, and AI writing capabilities [2][3]. - Tencent Yuanbao integrates various Tencent business ecosystems, showcasing high-quality content accumulation from WeChat public accounts, with a daily usage of the mixed model reaching 200 million across over 600 Tencent business scenarios [3][27]. - The report maintains profit forecasts for Tencent, projecting adjusted net profits of 200.2 billion, 225.6 billion, and 250.9 billion for 2024, 2025, and 2026 respectively, while continuing to support the "Outperform the Market" rating [27]. Summary by Sections Product Features - Tencent Yuanbao focuses on efficiency and entertainment, offering features like AI search, AI summarization, and AI writing, along with creative drawing and avatar generation [4][11]. - The AI search function provides concise answers to user queries, ensuring high timeliness and accuracy by integrating with WeChat search and Sogou search [4][10]. - The AI summarization feature delivers content that closely aligns with user inquiries, outperforming competitors in quality [6][24]. Business Integration - The design of Yuanbao reflects Tencent's comprehensive content ecosystem, allowing users to access WeChat public account articles directly from search results [3][24]. - The internal usage of the mixed model across Tencent's products indicates a strategic push towards enhancing user experience and product capabilities [3][27]. Financial Projections - The report forecasts Tencent's adjusted net profits to grow from 200.2 billion in 2024 to 250.9 billion in 2026, indicating a positive outlook for the company's financial performance [27][31].

Core Insights - Tencent's Q1 2024 financial report shows a revenue of RMB 159.501 billion, a 6% YoY increase, and a net profit of RMB 50.265 billion, up 54% YoY, driven by growth in Online Advertising, Financial Technology, and Enterprise Services, with WeChat Channels being a significant contributor [1][2] WeChat Channels Growth - WeChat Channels has become a key growth driver for Tencent, with its gross profit increasing by 23% YoY and operating profit reaching RMB 52.6 billion, up 38% YoY [2] - The total user duration on WeChat Channels increased by over 80% YoY, indicating strong user engagement and the platform's growing commercial value [2][3] User Engagement Metrics - WeChat's monthly active users reached 1.02 billion in Q1 2024, with an average daily launch frequency of 21.9 times per user, reflecting enhanced user stickiness [3] - The increase in user engagement on WeChat Channels has contributed to the overall growth of WeChat's user base and activity levels [3] Commercial Function Development - WeChat Channels has introduced various commercial functions, including integration with WeCom for private connections, a "Products" tab for e-commerce, and content marketing features, enhancing its advertising capabilities [4][5] - The e-commerce segment of WeChat Channels has seen significant growth, with GMV nearly tripling in 2023 and a 244% increase in the number of orders [6][7] E-commerce Performance - In 2023, WeChat Channels reported a 300% increase in product supply and a 226% growth in brand GMV, with over 3,000 ecosystem partners contributing to more than 35% of overall GMV [6][7] - The platform is positioned to attract small and medium-sized merchants due to its low user acquisition costs and growing user base [6] Local Life Services Expansion - WeChat Channels is venturing into local life services, allowing select dining and tourism brands to join, with a lower service fee structure compared to traditional e-commerce categories [12][13] - The local life services sector is viewed as a "blue ocean" opportunity for WeChat Channels, leveraging its large user base and WeChat Pay for enhanced consumer convenience [13][14] Advertising Opportunities - WeChat Channels is seen as a rapidly growing market for advertisers, with Tencent's advertising revenue reaching RMB 101.5 billion in 2023, driven by new ad inventories from WeChat Channels [17] - The platform's early-stage development in live streaming presents opportunities for small and medium-sized advertisers to gain traction [17][18]