Huachuang Securities·2024-08-21 06:13Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700.HK) with a target price range of HKD 473.63 - 526.25, based on a 24-year NON-IFRS EPS valuation of 18-20x PE [1][10]. Core Insights - Tencent's 2Q24 results showed strong revenue resilience, with total revenue reaching CNY 161.1 billion, a year-over-year increase of 8%, aligning with Bloomberg consensus expectations. The gross profit was CNY 85.9 billion, up 21% year-over-year, resulting in a gross profit margin of 53.3% [1][41]. - The NON-IFRS net profit attributable to shareholders was CNY 57.3 billion, reflecting a significant year-over-year increase of 53%, exceeding Bloomberg consensus expectations [1][41]. - The report highlights that the gaming segment has crossed its low point, with domestic and overseas game revenues showing positive growth trends [1][41]. Revenue Breakdown - Gaming Revenue: - Overseas gaming revenue reached CNY 13.9 billion, up 9% year-over-year, driven by titles like "PUBGM" and "Brawl Stars" [1][41]. - Domestic gaming revenue was CNY 34.6 billion, also up 9% year-over-year, primarily from "Dungeon & Fighter: Origin" and "Valorant" [1][75]. - Social Network Revenue: - Revenue from social networks was CNY 30.3 billion, a 2% year-over-year increase, with a notable rise in paid memberships for Tencent Video [1][52]. - Advertising Revenue: - Advertising revenue reached CNY 29.9 billion, up 19% year-over-year, driven by growth in video and long-form video advertising [1][74]. - Financial Technology and Enterprise Services: - This segment generated CNY 50.4 billion, a 4% year-over-year increase, with cloud services and enterprise WeChat contributing significantly [1][74]. Future Outlook - The report anticipates continued revenue growth in the gaming sector, supported by deferred revenue recognition and a stable user base. Upcoming game releases and seasonal events are expected to drive further revenue contributions [1][10][41]. - The advertising business is projected to grow faster than the industry average, bolstered by increased user engagement in video and mini-programs [1][10].