TENCENT(00700) 光大证券·2024-07-31 06:01Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (0700 HK) with a target price of 430 HKD [3][4] Core Views - Tencent's investment portfolio is undervalued, with its holdings in listed companies potentially reaching 500 billion RMB [4] - Tencent's investment value in listed companies grew by 6 6% YoY in Q1 2024, reaching 356 8 billion RMB [4] - Tencent's holdings in 67 listed companies across public markets totaled 528 1 billion RMB as of June 2024, a significant YoY increase [4] - Tencent's US-listed holdings saw a 52% YoY increase in market value, reaching 421 2 billion RMB, accounting for 80% of its total listed holdings [4] Investment Portfolio Analysis Listed Companies - Tencent's investment in listed companies grew by 6 6% YoY in Q1 2024, reaching 356 8 billion RMB [4] - Tencent's holdings in 67 listed companies across public markets totaled 528 1 billion RMB as of June 2024, a significant YoY increase [4] - US-listed holdings saw a 52% YoY increase in market value, reaching 421 2 billion RMB, accounting for 80% of its total listed holdings [4] - A-share holdings decreased by 34% YoY to 151 billion RMB, while Hong Kong-listed holdings increased by 1% to 698 billion RMB [4] Non-Listed Companies - Tencent's investment in non-listed companies decreased by 1 2% YoY in Q1 2024, totaling 325 9 billion RMB [42] - The total investment in both listed and non-listed companies reached 682 6 billion RMB in Q1 2024, a 2 7% YoY increase [42] Financial Performance - Q1 2024 Non-IFRS net profit reached 502 65 billion RMB, a 54% YoY increase, with a net profit margin of 31 5%, up 9 8 percentage points YoY [4] - Gross margin improved to 52 6%, up 7 2 percentage points YoY, driven by high-margin businesses such as WeChat Video Accounts and mini-games [4] - Video Account total user time increased by over 80% YoY in Q1 2024, with mini-game MAU exceeding 500 million and daily usage reaching 60 minutes [4] Business Segments Gaming - Domestic gaming revenue declined by 2% YoY in Q1 2024, while overseas gaming revenue grew by 3% [103] - Deferred revenue reached a historical high of 106 1 billion RMB in Q1 2024, up 9 2% YoY, indicating potential future revenue growth [4] - Key games such as "DNF Mobile" and "Delta Action" are expected to drive future performance [4] Advertising - Advertising revenue grew by 26% YoY in Q1 2024, outperforming the industry average of 4 6%, driven by WeChat Video Accounts and mini-programs [114] - Video Account advertising is expected to continue contributing to revenue growth, with low marginal costs due to existing WeChat infrastructure [145] Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services grew by 7% YoY in Q1 2024, reaching 523 billion RMB [96] - Gross margin in this segment improved to 45 6%, driven by high-margin services such as wealth management and Video Account merchant service fees [120] Share Repurchase and Capital Allocation - Tencent's share repurchase program reached 375 15 billion HKD in Q2 2024, a 206% YoY increase [22] - The company plans to repurchase over 100 billion HKD in 2024, doubling the 2023 repurchase amount of 49 billion HKD [30] - Major shareholder Prosus's repurchase plan is expected to reach 54 1 billion HKD in 2024, remaining at a low level [21] Valuation and Outlook - The report forecasts Tencent's Non-IFRS net profit for 2024-2026 to be 2115 5, 2364 7, and 2554 2 billion RMB, respectively, representing increases of 13 3%, 12 4%, and 11 3% from previous estimates [97] - The current price implies a Non-IFRS PE of 15x, 14x, and 13x for 2024-2026, respectively [97]