Investment Rating - The report maintains an "Accumulate" rating for the company [4] Core Views - The company's main business advantages remain solid, with a steady recovery in game revenue, commercialization of the video number and mini-program ecosystem, and new growth driven by AI, indicating a stable performance outlook [6] - The company achieved a revenue of 1595.01 billion yuan in the reporting period, representing a year-on-year growth of 6.34% and a quarter-on-quarter growth of 2.77% [9] - Operating profit increased by 38.15% year-on-year, while net profit attributable to the company's equity holders rose by 62.12% year-on-year [9] Summary by Sections Revenue Performance - The value-added services business generated revenue of 786.29 billion yuan, a year-on-year decline of 0.89% [2] - International game market revenue grew by 34% year-on-year, with a revenue of 136 billion yuan, while domestic game revenue saw a slight decline of 2% to 345 billion yuan [2] - The internet advertising business saw a revenue increase of 26.44% year-on-year, reaching 265.06 billion yuan [3] Profitability - The company's gross margin improved to 52.58%, an increase of 7.12 percentage points year-on-year, driven by high-margin income growth from video numbers, mini-programs, and financial services [6] - The adjusted net profit for 2024-2026 is projected to be 1807 billion yuan, 1919 billion yuan, and 2073 billion yuan respectively [6] Financial Metrics - The company’s total market capitalization is approximately 3720.70 billion HKD, with a 52-week high of 401.00 HKD and a low of 260.20 HKD [5] - The projected earnings per share (EPS) for 2024-2026 are 19.2 yuan, 20.4 yuan, and 22.0 yuan, corresponding to price-to-earnings (PE) ratios of 19, 18, and 16 times respectively [6][19]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [2][9]. Core Insights - In Q1 2024, Tencent's online advertising revenue reached 26.5 billion (yoy +26.4%, qoq -11%), driven by significant growth in video account advertising, mini-program advertising, and long video advertising due to increased user engagement and AI-driven advertising technology [1][2]. - Financial technology and enterprise services revenue was 52.3 billion (yoy +7.4%, qoq -3.8%), with strong growth in wealth management services, although offline consumption spending slowed [1][2]. - The company expects new game launches, including "DNF" in Q2, to contribute to revenue growth, alongside enhanced monetization expectations for "Peacekeeper Elite" and "Honor of Kings" from Q2 to Q4 [2][6]. Financial Performance Summary - Q1 2024 total revenue was 159.5 billion (yoy +6.3%, qoq +2.8%), with a gross margin of 52.58% (yoy +7.1pp, qoq +2.6pp) [6][12]. - The IFRS net profit for Q1 2024 was 41.9 billion (yoy +62.1%, qoq +55%), while the Non-IFRS net profit was 50.3 billion (yoy +54.5%, qoq +17.8%) [6][12]. - Value-added services revenue was 78.6 billion (yoy -0.9%, qoq +13.8%), with international game revenue at 13.6 billion (yoy +2.7%, qoq -2.2%) and domestic game revenue at 34.5 billion (yoy -1.7%, qoq +27.8%) [6][12]. Earnings Forecast - The forecast for IFRS net profit from 2024 to 2026 is 165.7 billion, 188.4 billion, and 218.0 billion respectively, with Non-IFRS net profit expected to be 211.0 billion, 241.8 billion, and 276.1 billion [2][8]. - The report adjusts the profit forecast upwards due to better-than-expected performance in value-added services, advertising, and investment income [2][8]. Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, setting a target price of 415.62 HKD, which corresponds to 378.46 RMB [2][9].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [12][15]. Core Insights - Tencent's core business shows robust growth, with profits significantly exceeding market expectations. The overall gross margin improved notably, driven by cost optimization and increased investment income, leading to an adjusted net profit margin of 32% [2][46]. - The report highlights the strong performance of the video account feature, which is entering a positive cycle in user growth, content supply, and creator ecology [44][57]. - Future profit growth is anticipated from cost reduction in existing businesses and the continued contribution of high-margin new businesses, particularly in video accounts and mini-games [57][66]. Summary by Sections 1. Operational Data - Video account total usage time grew over 80% year-on-year in Q1 2024, and Tencent Music's paid membership maintained a growth rate of over 20% for four consecutive quarters [2][18]. - The combined monthly active users (MAU) for WeChat and WeChat reached 1.359 billion, with QQ's MAU at 553 million [8][21]. 2. Overall Performance - In Q1 2024, Tencent achieved revenue of 159.5 billion RMB (up 6% YoY, up 3% QoQ), operating profit of 52.6 billion RMB (up 30% YoY, up 27% QoQ), and net profit attributable to shareholders of 41.9 billion RMB (up 62% YoY, up 55% QoQ) [7][23]. - The overall gross margin reached 52.6%, with significant improvements across all business segments [49][66]. 3. Value-Added Services - Game revenue remained flat YoY in Q1 2024, with domestic and international revenue growing by 3% and 34% respectively. The gaming business is expected to return to positive growth starting Q2 2024 [59][61]. - Tencent Video's paid membership grew by 8% YoY, reaching 116 million, while Tencent Music's paid membership increased by 20% to 114 million [59][64]. 4. Advertising Business - The advertising business grew by 26% YoY in Q1 2024, driven by the performance of WeChat video accounts, mini-programs, and AI-driven advertising technology upgrades [66][67]. - The report anticipates that video account advertising will contribute approximately 26 billion RMB in 2024, with long-term advertising potential exceeding 70 billion RMB [66][67].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HKD 464.84, compared to the current price of HKD 395.00 [6][7]. Core Insights - The company reported a revenue of CNY 159.5 billion for Q1 2024, representing a year-over-year (YOY) increase of 6% and a quarter-over-quarter (QOQ) increase of 3%, which met expectations. The gross profit was CNY 83.9 billion, with a YOY increase of 23% and a QOQ increase of 8%, resulting in a gross profit margin (GPM) of 53%, up 7 percentage points YOY and 3 percentage points QOQ. The NON-IFRS net profit attributable to shareholders was CNY 50.3 billion, a significant YOY increase of 54% and a QOQ increase of 18%, exceeding expectations [12][5]. Summary by Sections Q1 2024 Financial Results - Revenue met expectations at CNY 159.5 billion, with a YOY increase of 6% and QOQ increase of 3. Gross profit reached CNY 83.9 billion, with a GPM of 53%, reflecting a strong operational efficiency and revenue quality improvement [12][5]. - The company transitioned from cost-cutting to enhancing operational efficiency, leading to a significant increase in gross profit growth outpacing revenue growth [12]. Business Segment Performance - **Overseas Gaming**: Revenue from international gaming was CNY 13.6 billion, a YOY increase of 3%, driven by the recovery of Supercell's games. The overall revenue from overseas gaming is expected to grow as the revenue recognition cycle for Supercell is longer [38]. - **Domestic Gaming**: Revenue was CNY 34.5 billion, a slight YOY decrease of 2%, but the revenue stream showed a positive growth of 2% YOY in Q1 2024, indicating recovery [34]. - **Social Networks**: Revenue was CNY 30.5 billion, a YOY decrease of 2%, but the number of paid users increased by 12% YOY, driven by quality content [12]. - **Advertising**: Revenue reached CNY 26.5 billion, a YOY increase of 26%, exceeding expectations, primarily from the WeChat ecosystem [19]. - **Financial Technology and Enterprise Services**: Revenue was CNY 52.3 billion, a YOY increase of 7%, with a GPM of 45.6%, marking a historical high [12]. Future Outlook - The company expects continued growth in its gaming and advertising segments, with several new game launches planned for the upcoming quarters, indicating a positive outlook for revenue recovery [23][34]. - The report projects revenue for 2024 to reach CNY 674 billion, with a YOY growth of 11%, and NON-IFRS net profit to reach CNY 199.2 billion, reflecting a YOY growth of 26% [7].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for the stock over the next 6 to 12 months [11][13]. Core Insights - The company's revenue for Q1 2024 reached 159.5 billion RMB, representing a year-on-year increase of 6.3%, surpassing Bloomberg's consensus estimate of 158.8 billion RMB [11][40]. - The non-IFRS net profit for Q1 2024 was 50.3 billion RMB, reflecting a year-on-year growth of 55%, also exceeding the expected 43 billion RMB [11][40]. - The overall gross margin improved to 52.58%, up 7 percentage points year-on-year and 3 percentage points quarter-on-quarter, driven by the rapid growth of high-margin revenue sources [2][57]. Summary by Sections 1. Revenue Growth and Profitability - Domestic gaming revenue was 34.5 billion RMB, down 2% year-on-year but up 28% quarter-on-quarter, exceeding expectations [11][24]. - International gaming revenue was 13.6 billion RMB, up 3% year-on-year, aligning with market expectations [11][25]. - Social network revenue was 30.5 billion RMB, down 2% year-on-year but up 8% quarter-on-quarter, meeting expectations [11][48]. - Advertising revenue reached 26.5 billion RMB, up 26% year-on-year, surpassing the expected 24.8 billion RMB [11][30]. - Financial technology and enterprise services revenue was 52.3 billion RMB, up 7% year-on-year but below the expected 55.1 billion RMB [11][68]. 2. Margin Improvement - The gross margin increase was attributed to the growth of high-margin revenue sources, including WeChat, video accounts, and search advertising [2][57]. - The gross margin for financial technology and enterprise services was 46%, up 11 percentage points year-on-year [2][58]. - The advertising business gross margin was 55%, up 13 percentage points year-on-year, primarily due to the growth in WeChat video accounts and search advertising [2][74]. 3. Expense Management - Sales expenses for Q1 2024 were 7.5 billion RMB, a 7% increase year-on-year, while management expenses were 24.8 billion RMB, up 1% year-on-year but down 9% quarter-on-quarter [2][76]. - The management expense ratio decreased by 0.9 percentage points year-on-year, indicating improved cost management [2][76]. 4. Earnings Forecast - The adjusted net profit estimates for 2024-2026 have been revised to 193.2 billion, 235.7 billion, and 266.3 billion RMB, respectively, with corresponding PE ratios of 18, 15, and 13 times [11][13].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings, expecting the stock price to outperform the industry index by over 15% in the next six months [3][24]. Core Insights - Tencent Holdings reported a significant increase in profitability, with Q1 2024 net profit reaching 41.9 billion HKD, a year-on-year growth of 62%, exceeding market expectations [3][4]. - The company's revenue for Q1 2024 was 159.5 billion HKD, a 6% year-on-year increase, aligning with market expectations [3][4]. - The report highlights the continuous improvement in gross margin, which reached 52.6% in Q1 2024, driven by an increase in high-margin business revenue [4][9]. Financial Performance Summary - **Revenue**: - 2022A: 554,552 million HKD - 2023A: 609,015 million HKD - 2024E: 669,368 million HKD - Growth rate (2023A): 9.8% [3][12] - **Net Profit**: - 2022A: 188,243 million HKD - 2023A: 115,216 million HKD - 2024E: 173,678 million HKD - Growth rate (2023A): -38.8% [3][12] - **EPS**: - 2022A: 19.98 HKD - 2023A: 12.23 HKD - 2024E: 18.44 HKD [3][12] - **P/E Ratio**: - 2022A: 17.6 - 2023A: 28.7 - 2024E: 19.1 [3][12] Business Segment Performance - **Gaming**: - Q1 2024 gaming revenue was 48.1 billion HKD, with domestic gaming revenue at 34.5 billion HKD, showing a slight decline of 2% year-on-year due to revenue deferral [5]. - **Online Advertising**: - Q1 2024 online advertising revenue grew by 26% year-on-year to 26.5 billion HKD, driven by the strong performance of video ads [7][9]. - **Financial Technology and Enterprise Services**: - Revenue increased by 7% year-on-year to 52.3 billion HKD, benefiting from the video account ecosystem [7][9]. Future Outlook - The report projects revenue growth for Tencent Holdings, estimating revenues of 669.4 billion HKD in 2024, 729.3 billion HKD in 2025, and 788.9 billion HKD in 2026 [9]. - Expected net profits are projected at 173.7 billion HKD for 2024, 194.9 billion HKD for 2025, and 214.1 billion HKD for 2026 [9]. - The report emphasizes the potential for continued growth in high-margin businesses such as mini-program games and video account advertising [9].

Investment Rating - Target price set at 480 HKD with a buy rating, indicating a potential upside of 20.9% from the last closing price [9][40][57] Core Insights - The company recorded a revenue of 159.5 billion RMB in Q1 2024, representing a year-on-year growth of 6% and a quarter-on-quarter increase of 2.8% [40] - Adjusted net profit for Q1 2024 reached 42.7 billion RMB, a significant increase of 62% year-on-year [40] - The gaming business is showing signs of recovery, with international market revenue growing by 3% to 13.6 billion RMB, while domestic market revenue decreased by 2% to 34.5 billion RMB [41][51] - Advertising revenue in Q1 2024 surged by 26% year-on-year to 26.5 billion RMB, driven by growth in WeChat video accounts and other platforms [44] - Financial technology and enterprise services revenue increased by 7% year-on-year to 52.3 billion RMB, supported by strong growth in wealth management services [42] Revenue Breakdown - For 2024, the projected revenue from value-added services is 313.6 billion RMB, advertising is 119.2 billion RMB, and financial technology and enterprise services is 228.1 billion RMB [20] - The company expects a gross margin of 53% in Q1 2024, up 7.5 percentage points year-on-year [45] - The number of paid value-added accounts reached 260 million, a 12% increase year-on-year [24] Gaming Business Outlook - The upcoming mobile version of "Dungeon & Fighter" is set to launch on May 21, 2024, with strong pre-registration numbers indicating high market interest [29][53] - The company is optimistic about the global gaming industry and is actively seeking investment opportunities [51] Video Account Growth - The WeChat video account has seen significant user engagement, with total usage time increasing by over 80% year-on-year in Q1 2024 [60] - The platform is becoming a key player in the short video industry, with expectations for continued growth in advertising and e-commerce revenue [33][44]

| --- | --- | --- | --- | --- | --- | |-----------------------------|----------------------|---------|---------|---------|---------| | 人民币百万元 | FY22 | FY23 | FY24E | FY25E | FY26E | | 营业收入 | 554,552 | 608,940 | 675,990 | 757,215 | 830,541 | | 毛利润 | 238,746 | 293,034 | 359,251 | 403,265 | 450,117 | | 调整后净利润 | 115,649 | 157,613 | 208,343 | 232,695 | 264,419 | | 调整后目标 PE(x) | | | 19.5 | 17.5 | 15.4 | | E= 浦银国际预测，资料来源： | Bloomberg 、浦银国际 | | | | | 流动负债合计 434,204 352,157 352,460 366,019 375,666 负债总额 795,271 703,5 ...

□微信月活（百万） yoy I 360 1340 1320 1300 1280 1 260 1240 1220 1200 1180 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% =微信月活 (百万) 收费增值服务注册用户 (百万) 1600 1400 1200 1000 800 600 400 200 0 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 资料来源：公司公告，东吴证券研究所 毛利率: ● 1Q24总体毛利率为 52.58% (YoY+16pct, qoq+5pct) , 毛利率正增长由于高毛利率收入来源的快速增长，包括 微信，视频号及搜一搜广告收入，小游戏平台服务费等。 ● 1Q24增值服务毛利率为57%（YoY+5pct, qoq-6pct），同比提升由于订阅收入增长，高毛利小游戏平台服务费增 长，以及分部内容成本与运营成本的下降。 联系人:张良卫/张家琦 腾讯(0700.hk): ...

Summary of the Conference Call Company and Industry - **Company**: Tencent - **Industry**: Gaming, Social Media, Cloud Computing, Financial Technology, SaaS Key Points and Arguments Financial Performance - Total revenue for Q1 2024 was RMB 160 billion, a year-on-year increase of 6% and a quarter-on-quarter increase of 3% [1] - Gross profit reached RMB 84 billion, up 23% year-on-year and 8% quarter-on-quarter [1] - Non-IFRS operating profit was RMB 59 billion, a 30% increase year-on-year and 19% quarter-on-quarter [1] - Non-IFRS net profit attributable to shareholders was RMB 50 billion, reflecting a 54% year-on-year increase and an 18% quarter-on-quarter increase [1] Gaming Sector - Active users in communication and social networks reached 136 million [1] - Domestic game revenue showed a general recovery trend with a 3% year-on-year increase [2] - International game revenue increased by 3% to RMB 14 billion, stable in constant currency [2] - Notable revenue growth from games like VALORANT and PUBG Mobile, with PUBG Mobile seeing double-digit growth in DAU and total revenue [4] - The flagship games, Honor of Kings and Peacekeeper Elite, showed monthly revenue growth in March [4] Digital Content and Advertising - Long video subscription revenue grew by 12% year-on-year, with daily active paid users reaching 116 million [2] - Video account advertising revenue doubled year-on-year due to increased viewership and click-through rates [5] - Overall advertising revenue increased by 26% to RMB 26.5 billion, benefiting from higher engagement and AI-driven ad targeting [4][5] Cloud Computing and SaaS - Tencent Cloud Media Services saw a 50% year-on-year revenue growth, recognized as a market leader for six consecutive years [5] - SaaS products like Tencent Docs and Tencent Meeting have seen increased adoption among enterprise clients [2][5] Shareholder Returns and Investments - Tencent plans to repurchase over HKD 100 billion in shares and increase dividends while investing in AI and high-quality content [1] - The company emphasizes a commitment to high-quality growth, focusing on core platforms and eliminating low-quality products [8][9] Future Outlook and Strategies - Management expressed confidence in the ongoing recovery of key games and the potential for new game releases to become evergreen titles [6][10] - The company is optimistic about maintaining advertising revenue growth despite a challenging environment, leveraging AI for better ad targeting [8][12] - Tencent aims to continue investing in new areas such as AI, new games, and e-commerce services to drive future growth [8][9] Risks and Challenges - The gaming industry remains competitive, with new games needing to compete against established titles [10][11] - Financial technology growth is expected to slow down due to macroeconomic conditions, but wealth management services are anticipated to grow [16][14] Miscellaneous - The company is exploring the use of AI in various sectors, including customer service in gaming [16] - Tencent's diverse global game development teams contribute to its success, with a focus on sharing best practices [18][19] This summary encapsulates the key insights from Tencent's conference call, highlighting its financial performance, strategic initiatives, and outlook for the future.