Zhao Yin Guo Ji·2024-08-15 02:23Investment Rating - The report maintains a "Buy" rating for Tencent with a target price of HKD 480, reflecting a potential upside of 28.4% from the current price of HKD 373.80 [3][17]. Core Insights - Tencent reported a total revenue of RMB 161.1 billion for Q2 2024, representing an 8% year-on-year growth, which aligns closely with market expectations [3]. - Non-IFRS net income increased by 53% to RMB 57.3 billion, exceeding both the report's and market consensus forecasts by 17% and 18%, respectively, primarily due to a significant increase in share of profits from associates [3]. - The gaming segment showed a robust recovery with a 9% year-on-year revenue growth, driven by successful game launches and the revival of flagship titles [3]. - Online advertising revenue grew by 19% year-on-year, supported by strong performance in video accounts and long-form video advertising [3]. - Financial technology and business services revenue saw a modest 4% growth, indicating pressure from consumer spending and stricter risk management [3]. Financial Summary - For FY24E, total revenue is projected at RMB 658.2 billion, with adjusted net profit expected to reach RMB 214.6 billion, reflecting a 7.9% increase from previous estimates [8]. - The gross profit margin is anticipated to be 53.3%, with an operating profit margin of 31.5% for FY24E [8]. - The report forecasts a compound annual growth rate (CAGR) of 18% for non-IFRS net profit from 2024 to 2026, supported by high-quality growth strategies [3][34]. Valuation Metrics - The report estimates the value of Tencent's online gaming business at HKD 190.6 based on a projected P/E ratio of 18x for FY24E, which is in line with global gaming peers [10]. - The fintech business is valued at HKD 79.7, reflecting a premium over the industry average due to Tencent's strong position in China's digital payment market [11]. - The report applies a 30% holding company discount to the fair value of Tencent's strategic investments, estimating their contribution to be HKD 67.3 per share [23].