Huajing Securities·2024-07-25 11:01Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (700 HK) with a target price of HK$485.00, representing a potential upside of 26% from the current price of HK$384.80 [1][11][13]. Core Insights - The strong performance of "Dungeon & Fighter" and Supercell is driving accelerated growth in gaming revenue, leading to an upward revision of revenue forecasts for 2Q24 and 2024 [1][8]. - Tencent is focusing on high-quality growth with sustainable margin expansion, which is expected to support profitability [1][8]. - The report anticipates a 7% and 9% year-on-year growth in gaming revenue for 2Q24 and 2024, respectively, up from previous estimates of 5% [1][8]. Summary by Sections Financial Performance - Revenue for 2024E is projected at RMB 664,448 million, with a year-on-year growth of 0% [9]. - The expected EPS for 2024E is RMB 21.34, reflecting a 4% increase from the previous estimate [9]. - The report forecasts a net profit margin of 29.9% for 2024, an increase of approximately 710 basis points year-on-year [9]. Gaming Segment - The gaming segment is expected to generate RMB 100 billion in revenue from "Dungeon & Fighter" in 2024, with a projected year-on-year growth of 7% for 2Q24 and 9% for 2024 [1][8]. - The report highlights that "Dungeon & Fighter" ranked third in the iOS bestseller list in China during May and June [1][8]. Advertising and Other Segments - The report slightly lowers the advertising revenue growth forecast for 2Q24 to 18%, down from 22%, due to a high base effect from the previous year [1][8]. - Financial technology and enterprise services revenue is expected to grow by 4% year-on-year, reflecting a slight downward adjustment from previous estimates [1][8]. Valuation - The SOTP valuation for the gaming segment is adjusted to HK$1.5 trillion, corresponding to an 18x P/E for 2024 [1][14]. - The advertising segment's valuation remains at HK$1.2 trillion, based on a 20x P/E for 2024 [1][15]. - The report indicates a total company valuation of HK$5.169 trillion after accounting for various segments and net cash [1][36].