Tianfeng Securities·2024-08-20 00:42Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of 476 HKD, indicating an expected relative return of over 20% within the next six months [5][8]. Core Insights - Tencent's overall performance in Q2 2024 shows strong profitability, with revenue growth of 8% year-on-year and a significant increase in Non-IFRS net profit by 53% year-on-year, exceeding market expectations [8]. - The company's gross profit margin improved to approximately 53.3%, reflecting a year-on-year increase of 5.8 percentage points, indicating a positive trend in profitability [8]. - The management anticipates a continued shift towards a higher gross margin business mix, although the growth rate of gross profit may slow down as efficiency measures begin to show diminishing returns [8]. Summary by Sections Overall Performance - Q2 2024 revenue increased by 8% year-on-year and 1% quarter-on-quarter, aligning with Bloomberg's expectations [8]. - Non-IFRS operating profit rose by 27% year-on-year, while Non-IFRS net profit reached 86 billion HKD, marking a 53% year-on-year increase [8]. Gaming Sector - The gaming revenue growth rate has recovered, with a year-on-year increase of 9% in Q2 2024, driven by popular titles such as "Honor of Kings" and "Peacekeeper Elite" [8]. - The management expects continued revenue growth in the gaming sector, supported by strong performance in both domestic and overseas markets [8]. Advertising Sector - Advertising revenue grew by 19% year-on-year in Q2 2024, benefiting from the performance of video accounts and long videos [8]. - The company aims to enhance its advertising strategy through technology upgrades and increasing the proportion of closed-loop advertising [8]. Financial Technology and Enterprise Services - Financial technology and enterprise services revenue saw a modest increase of 4% year-on-year, impacted by a slowdown in consumer spending and stricter risk management measures [8]. - The growth in cloud services and video account merchant service fees contributed positively to enterprise services [8]. Investment Recommendations - The report projects Non-IFRS net profit for 2024-2026 to be 217.8 billion, 251.7 billion, and 278.6 billion HKD respectively, with year-on-year growth rates of 38%, 16%, and 11% [8]. - The current valuation metrics indicate that Tencent's stock is trading at a relatively low price-to-earnings ratio compared to historical averages, suggesting potential for valuation improvement as gaming growth resumes [8].