Huachuang Securities·2024-08-21 06:03Investment 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 [4][5]. Core Insights - Tencent's 2Q24 financial results showed strong revenue resilience and profits significantly exceeding expectations, with total revenue reaching CNY 161.1 billion, a year-over-year increase of 8%, and NON-IFRS net profit of CNY 57.3 billion, up 53% year-over-year [4][61]. - The gaming segment is expected to accelerate growth due to deferred revenue recognition and stable performance, while the advertising business is anticipated to outpace industry growth driven by increased commercialization of video accounts and higher user engagement in mini-programs [5][4]. Financial Performance Summary - Revenue and Profitability: In 2Q24, Tencent achieved revenue of CNY 161.1 billion, with a gross profit margin of 53.3%, and NON-IFRS net profit of CNY 57.3 billion, significantly above Bloomberg consensus estimates [4][61]. - Segment Performance: - Gaming: Revenue from overseas games reached CNY 13.9 billion, up 9% year-over-year, driven by titles like "PUBGM" and "Brawl Stars" [4][66]. - Social Networks: Revenue was CNY 30.3 billion, a 2% increase year-over-year, supported by popular series on Tencent Video [4][72]. - Advertising: Revenue grew by 19% year-over-year to CNY 29.9 billion, primarily due to growth in video accounts and long-form video advertising [4][101]. - Financial Technology and Enterprise Services: Revenue was CNY 50.4 billion, a 4% increase year-over-year, with cloud services contributing significantly [4][83]. Future Outlook - The report anticipates continued strong performance in the gaming sector, with new game releases expected to convert user engagement into revenue. Upcoming titles include "Delta Force" and "Honor of Kings: Dawn of the Stars" [4][70][73]. - The advertising business is projected to benefit from improved user engagement and content-driven growth, with expectations for a gradual increase in revenue growth rates [4][5].