Core Viewpoint - The report from CMB International indicates an upward adjustment in Tencent Holdings' (00700) adjusted EPS growth forecast for 2025-2027, with expected growth rates of 21%/18%/9%, and a target price increase to HKD 729, maintaining a "buy" rating [1] Group 1: Financial Performance - In Q3 2025, Tencent's total revenue increased by 15% year-on-year to RMB 192.87 billion, exceeding expectations by 4%, driven by gaming (+23%), social (+4%), marketing (+21%), and financial enterprise services (+10%) [2] - Gross profit rose by 22% year-on-year, outpacing revenue growth, with a gross margin improvement of approximately 3.3 percentage points to 56.4%, attributed to high-margin businesses such as domestic games, video accounts, and WeChat search, along with ongoing cost optimization in cloud services [2] - Adjusted EPS reached RMB 7.58, a 19% year-on-year increase, surpassing expectations by 6% [2] Group 2: Operational Highlights - Domestic game revenue grew by 15% year-on-year, benefiting from titles like Delta Action, Valorant, and Honor of Kings; overseas game revenue surged by 43%, driven by Brawl Stars, new games, and studio mergers [3] - Social revenue increased by 5% year-on-year, supported by video account live streaming and paid music services [3] - Marketing revenue rose by 21% year-on-year, enhanced by new advertising products and AI-driven advertising effectiveness [3] - Financial technology revenue experienced high single-digit growth, with accelerated growth in commercial payment transaction volume; enterprise services saw double-digit growth, driven by merchant technology service fees and significant growth in cloud storage data management [3] Group 3: Outlook and Valuation - The report anticipates that AI technology investments will support revenue growth across Tencent's product lines, with expected gaming revenue growth of 21%/9% and advertising growth of 19%/13% for 2025/26, indicating potential for further upward adjustments [4] - Capital expenditure as a percentage of revenue is expected to be below 10% in 2025, although the absolute value is projected to exceed RMB 80 billion, primarily for product iteration and upgrades, rather than focusing on computing power as a core business [4] - The company is positioned to leverage its leading traffic supply in the consumer sector for AI application implementation [4]

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Core Insights - Tencent Holdings reported a record high revenue of 192.87 billion yuan for Q3 2025, marking a 15% year-on-year increase, with net profit attributable to shareholders reaching 63.13 billion yuan, up 19% [2][3] - The company’s total compensation cost for Q3 2025 was 32.4 billion yuan, with an average monthly salary per employee of 93,900 yuan, reflecting a 3.6% increase from the previous year [8][9] Revenue Breakdown - Tencent's domestic gaming revenue reached 42.8 billion yuan in Q3 2025, a 15% increase, driven by new game releases and growth from established titles [4] - International gaming revenue surged to 20.8 billion yuan, a 43% increase, attributed to the performance of Supercell games and new PC and console game releases [4] - Social network revenue grew by 5% to 32.3 billion yuan, supported by video live streaming and music subscription services [4] - Marketing services revenue increased by 21% to 36.2 billion yuan, driven by higher ad exposure and improved user engagement [4] - Financial technology and enterprise services revenue rose by 10% to 58.2 billion yuan, benefiting from increased commercial payment activities and cloud service demand [5] Profitability Metrics - Gross profit for Q3 2025 increased by 22% to 108.8 billion yuan, with the gross margin improving from 53% to 56% [5] - The company maintained strong cash flow, with net cash of 102.4 billion yuan as of the end of Q3 2025, up from 74.6 billion yuan at the end of H1 2025 [6] Employee Compensation - Tencent's workforce grew to 115,000 employees by the end of Q3 2025, up from 108,800 a year earlier [7] - The average annual salary per employee exceeded 1 million yuan, reflecting the company's competitive compensation strategy [9]

Tencent Holdings Q3 2023 Earnings Call Summary Industry and Company Overview - The document discusses Tencent Holdings, a leading technology and entertainment company in China, focusing on its Q3 2023 earnings performance and strategic initiatives in the gaming and advertising sectors. Key Points and Arguments Financial Performance - Tencent reported a strong Q3 performance with revenue growth of 15% year-over-year, exceeding market expectations of 12%-13% [3] - Non-GAAP profit reached 70.6 billion, up 18% year-over-year, also surpassing expectations [3] - Domestic gaming revenue grew by 15%, driven by the success of "Delta Action" and stable growth from long-term games like "Honor of Kings" and "Peacekeeper Elite" [2][3] - Overseas gaming revenue saw a significant increase of 43%, primarily due to one-time acquisitions and upfront payments for buyout games [2][3] Advertising Business - Advertising revenue growth reached 21%, higher than market expectations, supported by a significant increase in AI marketing penetration [2][4] - eCPM (effective cost per mille) increased by approximately 10%, contributing to the overall growth in advertising revenue [4] Gross Margin and Cost Management - Gross margin for Q3 was 56.4%, driven by value-added services and advertising business [2][7] - The performance of self-developed games and high-margin products like video accounts contributed to the gross margin increase [7] - R&D expenses rose by 28% year-over-year, partially offsetting revenue and gross margin growth [7] Deferred Revenue and Future Outlook - As of the end of Q3, Tencent's deferred gaming revenue reached 122 billion, a year-over-year increase of nearly 15%, providing strong support for future performance [8] - The company anticipates a significant increase in capital expenditures in Q4, indicating continued investment in AI initiatives [8] AI Strategy and Impact - Tencent's ongoing investment in AI technologies, including mixed reality images and 3D modeling, has reached an industry-leading level, positively impacting advertising performance [5] - AI applications in advertising have significantly improved conversion rates and ad display opportunities [5] Regulatory Environment and Compliance - Tencent has made progress in compliance with Apple's 15% commission policy for iOS app payments, which is lower than the 30% rate for apps [6][9] - The short-term impact on Tencent's mini-program games is expected to be minimal, with a potential positive effect on the ecosystem in the medium term [10] Strategic Innovations in Gaming - Highlights for Tencent's gaming business in 2025 include the accelerated release of "Delta Action" on PC, a gradual recovery of the PC market, and innovative gameplay to enhance daily active users (DAU) and user engagement [11][12] - The focus on user-generated content (UGC) and new gameplay innovations is expected to drive continued growth [12] Investment Recommendations - Based on the robust fundamentals, ongoing breakthroughs in gaming, and the integration of AI with advertising, Tencent is recommended for continued investment, with expectations of a higher valuation premium compared to the industry [12][13] Additional Important Insights - The overall sentiment regarding Tencent's future performance remains optimistic, with a strong emphasis on its strategic positioning in AI and gaming sectors [8][12]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings, with a target price based on adjusted PE ratios of 21X for 2025, 18X for 2026, and 16X for 2027 [5]. Core Insights - Tencent's overall performance in Q3 2025 exceeded expectations, with a revenue growth of 15% year-on-year and a gross profit increase of 22%, driven primarily by strong growth in gaming and advertising revenues [1][2]. - The company's strategic investments in AI are beginning to yield results, enhancing efficiency across various business scenarios, including targeted advertising and user engagement in gaming [2]. - The report highlights the robust performance of Tencent's value-added services, particularly in overseas gaming, which saw a 43% year-on-year revenue increase [3]. Summary by Sections Overall Performance - In Q3 2025, Tencent's revenue reached 750.2 billion RMB, with Non-IFRS net profit also increasing by 18% year-on-year, surpassing Bloomberg consensus estimates [1][5]. Value-Added Services - Revenue from value-added services grew by 16% to 959 billion RMB, with domestic game revenue contributing significantly, particularly from long-standing titles like "Honor of Kings" and "Peacekeeper Elite" [3]. Marketing Services - Marketing services revenue rose by 21% to 362 billion RMB, driven by increased user engagement and improvements in advertising effectiveness due to AI [4]. Financial Technology and Enterprise Services - Financial technology and enterprise services revenue increased by 10% to 582 billion RMB, with notable growth in cloud services and commercial payment activities [5]. Financial Forecast - The report projects revenues of 750.2 billion RMB for 2025, 835.3 billion RMB for 2026, and 915.5 billion RMB for 2027, with corresponding Non-IFRS net profits of 260.3 billion RMB, 300.7 billion RMB, and 335.3 billion RMB respectively [6].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [46] Core Insights - Tencent's Q3 2025 revenue reached 192.9 billion RMB, a year-over-year increase of 15% and a quarter-over-quarter increase of 5% [9][17] - The company's operating profit was 63.6 billion RMB, up 19% year-over-year and 6% quarter-over-quarter [9][17] - Net profit attributable to shareholders was 63.1 billion RMB, also reflecting a 19% year-over-year increase and a 13% quarter-over-quarter increase [9][17] - Non-IFRS operating profit and net profit both grew by 18% year-over-year, reaching 72.6 billion RMB and 70.6 billion RMB respectively [9][17] Summary by Sections 1. Operational Data - WeChat's monthly active users (MAU) reached 1.414 billion, growing 2.3% year-over-year and 0.2% quarter-over-quarter [10] - QQ's smart terminal MAU continued to decline year-over-year [10] - Paid value-added service accounts reached 265 million, stable compared to the previous year [10] 2. Overall Performance - Gross margin improved to 56.4%, up 3.28 percentage points year-over-year [21] - Non-IFRS operating profit and net profit both increased by 18% year-over-year [17][21] 3. Value-Added Services - Game revenue grew by 23% year-over-year, with domestic and international markets increasing by 15% and 43% respectively [29] - Tencent Video maintained a leading position with 114 million video subscribers [29] - Online music service revenue increased by 27.2% year-over-year to 6.97 billion RMB [29] 4. Marketing Services - Marketing services revenue grew by 21% year-over-year to 36.2 billion RMB [38] - AI applications enhanced advertising click-through and conversion rates [38] 5. Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services grew by 10% year-over-year to 58.2 billion RMB [41] - The average payment transaction amount increased, and the business maintained the lowest bad debt ratio in the industry [41] 6. Profit Forecast and Investment Rating - Revenue forecasts for 2025-2027 are 753.9 billion, 847.4 billion, and 931.4 billion RMB respectively [42] - Non-IFRS net profit forecasts for the same period are 260 billion, 298.9 billion, and 338.1 billion RMB [42] - The target market value for Tencent in 2025 is set at 6.6 trillion RMB, corresponding to a target price of 791 HKD [42]

Core Insights - The 27th China International High-Tech Achievements Fair (CIHTAF) will be held from November 14 to 16, 2025, in Shenzhen, showcasing over 5,000 innovative products and technologies from more than 5,000 renowned companies and international organizations across over 100 countries and regions [1] - The event highlights the integration of cutting-edge technology with diversified and convenient payment methods, showcasing Shenzhen's modern service capabilities [1] Payment Services - A prominent "Payment Inquiry Desk" is set up at the entrance of the fair to assist foreign exhibitors and visitors with mobile payment inquiries [2] - Foreign attendees, such as a visitor from Mongolia, expressed satisfaction with the ability to use their local e-wallets, like Hipay, for payments without needing to switch apps or bind new cards [4] - A German exhibitor praised the ease of registering for mobile payments and binding international credit cards, enhancing their purchasing experience at the fair [5] Financial Services Ecosystem - The fair features a multi-faceted payment environment, including mobile payments, POS card transactions, cash services, and currency exchange, ensuring a comprehensive payment experience [8] - Financial institutions, such as the Industrial and Commercial Bank of China (ICBC), provide tailored financial services, including cross-border settlement and currency risk management solutions, to support international transactions [10][12] Enhancements in Payment Environment - As of October 2025, Shenzhen's payment environment has significantly improved, with 99.99% of key merchants accepting foreign cards and 3,844 ATMs supporting cash withdrawals from foreign cards [13] - The People's Bank of China, Shenzhen Branch, has established comprehensive service centers at airports and ports to enhance the payment experience for foreign visitors [13] Innovative Financial Products - The People's Bank of China has guided local institutions to launch products that match tourism consumption scenarios, exemplified by the "Scene Benefit Loan (Tourism Scene)" initiative, which integrates finance with tourism [14] - The focus is on optimizing payment services to enhance Shenzhen's international openness and service quality [15]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [1] Core Insights - Tencent Holdings reported a Q3 2025 revenue of 192.9 billion RMB, a 15% year-on-year increase, exceeding Bloomberg consensus expectations by 2% [8] - Adjusted net profit for Q3 2025 was 70.6 billion RMB, up 18% year-on-year, surpassing consensus expectations by 7% [8] - The growth in revenue was driven by strong performance in value-added services and advertising, particularly in overseas gaming [8] - The report highlights the significant contribution of new games and the sustained performance of established titles [8] - The company is expected to see continued growth in adjusted net profit, with projections of 260.2 billion RMB, 300.7 billion RMB, and 337.3 billion RMB for 2025, 2026, and 2027 respectively [8] Financial Data and Earnings Forecast - Revenue projections for Tencent Holdings are as follows: - 2023: 609 billion RMB - 2024: 660.3 billion RMB - 2025E: 755.6 billion RMB - 2026E: 845.3 billion RMB - 2027E: 926.7 billion RMB [7] - Adjusted net profit forecasts are: - 2023: 157.7 billion RMB - 2024: 222.7 billion RMB - 2025E: 260.2 billion RMB - 2026E: 300.7 billion RMB - 2027E: 337.3 billion RMB [7] - The report indicates a projected increase in earnings per share from 16.68 RMB in 2023 to 36.89 RMB in 2027 [7] Revenue Breakdown - The revenue breakdown for Q3 2025 includes: - Value-added services: 95.9 billion RMB - Online games: 63.6 billion RMB - Social networks: 32.2 billion RMB - Online advertising: 36.2 billion RMB - Financial technology and enterprise services: 58.2 billion RMB [9] - Year-on-year growth rates for revenue segments indicate strong performance across various business lines, particularly in online advertising and value-added services [9] Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, estimating a target price of 791 HKD, representing a potential upside of 23.4% from the current price [8][10]

Investment Rating - The investment rating for the company is "Outperform the Market" [4][35]. Core Insights - The company reported a revenue growth of 15.4% year-on-year, reaching 192.9 billion yuan in Q3 2025, driven primarily by strong performance in advertising and gaming sectors [1][9]. - Adjusted operating profit increased by 18% year-on-year to 72.6 billion yuan, with a notable improvement in profit margins due to a higher proportion of high-margin businesses in the revenue mix [1][9]. - The company’s comprehensive gross margin improved to 56%, up 3 percentage points year-on-year, with significant contributions from value-added services, online advertising, and financial technology [1][10]. Revenue Breakdown - The online gaming revenue grew by 23% year-on-year to 63.6 billion yuan, with domestic market revenue increasing by 15% to 42.8 billion yuan, and international market revenue rising by 43% to 20.8 billion yuan [3][24]. - Marketing services revenue reached 36.2 billion yuan, reflecting a 21% year-on-year growth, driven by increased eCPM prices and enhanced user engagement [29]. - Financial technology and enterprise services revenue grew by 10% year-on-year to 58.2 billion yuan, benefiting from increased commercial payment activities and cloud service growth [30]. Financial Projections - The company’s adjusted net profit forecasts for 2025, 2026, and 2027 are 262.6 billion yuan, 301.3 billion yuan, and 345.4 billion yuan respectively, with slight upward adjustments of 1%, 1%, and 2% [35]. - The projected revenue for 2025 is 753.3 billion yuan, reflecting a year-on-year growth of 14.1% [8].

Group 1: Financial Performance - In Q3 2025, Tencent achieved revenue of 192.9 billion yuan, a year-on-year increase of 15.4% [1] - Adjusted operating profit was 72.6 billion yuan, up 18.4% year-on-year, with an adjusted operating profit margin of 37.6%, an increase of 1.0 percentage points [1] - Adjusted net profit reached 70.6 billion yuan, reflecting an 18.0% year-on-year growth, with an adjusted net profit margin of 36.6%, up 0.8 percentage points [1] Group 2: Revenue Breakdown - Value-added services revenue in Q3 2025 was 95.9 billion yuan, a year-on-year increase of 15.9%, with a gross margin of 61.2%, up 3.7 percentage points [2] - Domestic and overseas game revenues were 42.8 billion yuan and 20.8 billion yuan, respectively, showing year-on-year growth of 14.7% and 43.4% [2] - Social network revenue was 32.3 billion yuan, up 4.4% year-on-year, driven by growth in video live streaming, music subscription services, and mini-game platform service fees [2] Group 3: AI and Marketing Services - Marketing services revenue in Q3 2025 was 36.2 billion yuan, a year-on-year increase of 20.8%, benefiting from improved user engagement and ad loading rates [3] - The introduction of the Tencent Advertising AIM+ product matrix supports advertisers in automatic targeting, bidding, and placement optimization [3] - The company’s mixed Yuan image generation model ranks first globally among text-to-image models [3] Group 4: Capital Expenditure and R&D - R&D expenditure was 22.8 billion yuan, with a research spending rate of 11.8%, an increase of 1.1 percentage points year-on-year [1] - Capital expenditure was 13 billion yuan, down 24.0% year-on-year, while cash flow capital expenditures increased by 66.7% to 20 billion yuan [1]