TENCENT(00700) 广发证券·2024-06-27 05:31Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HKD 507.55 per share [56][76] Core Views - Tencent's strategy focuses on high-quality growth, with key investments in overseas gaming, short video, and enterprise services since 2021 [89] - The company's core businesses remain stable, while new growth drivers such as video accounts and mini-games are emerging, contributing to mid-term performance growth [89] - Long-term growth is expected from generative AI investments, which are exploring new user scenarios and technological advancements [89] Financial Projections - Revenue is projected to reach RMB 658.9 billion in 2024 and RMB 726.1 billion in 2025, representing year-on-year growth of 8% and 10%, respectively [4][76] - Adjusted net profit attributable to shareholders is expected to grow by 29% in 2024 and 14% in 2025, reaching RMB 203 billion and RMB 231.2 billion, respectively [32][76] - Gross margin is forecasted to improve to 52.8% in 2024 and 53.2% in 2025, driven by higher-quality business streams [32] Business Segments Gaming - Domestic gaming revenue reached RMB 126.7 billion in 2023, up 2% YoY, while overseas gaming revenue grew 14% YoY to RMB 53.2 billion [74] - Tencent's overseas gaming investments have been a key focus since 2021, with contributions to overall gaming revenue steadily increasing [74] - The company plans to launch new games, such as "Dungeon & Fighter: Origin," which is expected to drive growth in 2024 [88] Financial Technology - WeChat Pay's revenue growth is closely tied to the overall mobile payment market, which saw transaction volume increase by 16.81% YoY to 1.851 trillion transactions in 2023 [2] - Non-payment businesses, such as credit and wealth management services, have significant growth potential, with WeBank playing a key role in expanding these services [8][10][119] Advertising - Advertising revenue is expected to grow by 19% in 2024 and 16% in 2025, driven by inventory expansion on WeChat, video accounts, and mini-games [40] - Video accounts' total viewing time grew by 100% YoY in 2023, with further growth of 80% YoY in Q1 2024, providing strong monetization opportunities [17] Enterprise Services - Tencent's enterprise services are benefiting from the growth of video accounts and mini-programs, with live-streaming e-commerce and technical service fees contributing to revenue [38] - The company is also investing in generative AI, which is expected to enhance SaaS tool efficiency and create new revenue streams in the medium to long term [152] Valuation - Using the SOTP valuation method, Tencent's core businesses are valued at HKD 4.26 trillion, with gaming and advertising contributing HKD 1.56 trillion and HKD 1.23 trillion, respectively [83] - The company's secondary market investments are valued at HKD 494.7 billion, contributing HKD 52.84 per share to the total valuation [135] Strategic Investments - Tencent has made significant investments in overseas gaming companies, including Riot Games, Supercell, and Epic Games, which have contributed to its global gaming presence [108][110] - The company is also investing in generative AI, with its Hunyuan large model and Tencent Yuanbao AI assistant launched in 2023 and 2024, respectively [132]