HTSC·2024-09-10 04:03Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 465.35 [2][9]. Core Insights - The company recently launched the new "Hunyuan Turbo" model, which has improved training efficiency by 108% and reduced inference costs by 50%, positioning it competitively against GPT-4o [3][4]. - The company's cloud business has shown double-digit revenue growth in Q2 2024, with key strengths in audio-video, live streaming, and gaming sectors [3]. - Long-term growth is anticipated from the demand for AIGC (AI-Generated Content) and internal cost reductions driven by AI technologies [3][4]. Summary by Sections Financial Projections - Revenue is projected to grow from RMB 609,015 million in 2023 to RMB 657,251 million in 2024, reflecting a 7.92% increase [7]. - Adjusted net profit is expected to rebound from RMB 115,216 million in 2023 to RMB 176,105 million in 2024, marking a 52.85% growth [7]. - The report forecasts an EPS increase from RMB 12.33 in 2023 to RMB 18.85 in 2024 [7]. Business Strategies - The company is focusing on three main strategies to drive digital transformation and global expansion: 1. Efficiency through Data: The Hunyuan model has been applied in over 700 business scenarios, saving the company over RMB 300 million [5][12]. 2. Adaptation to Trends: The company is developing software compatible with domestic chips, targeting sectors like finance and government, with a penetration rate of over 50% in major clients for Tencent Meeting [5][12]. 3. Global Expansion: The company has built a global cloud infrastructure serving over 100 countries, exemplified by the global release of the game "Mingchao" and digital infrastructure projects in Southeast Asia [5][12]. Cloud and AI Innovations - The Hunyuan Turbo model features a trillion-level MoE architecture, achieving a 100% improvement in inference efficiency and a 50% reduction in costs [4][13]. - The company has enhanced its cloud services with new AI applications, including a code assistant that has improved code generation rates by 5% and a smart meeting feature serving over 15 million users daily [13]. Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, assigning a per-share value of HKD 164.11 for the gaming business, HKD 19.20 for social networking, and HKD 97.27 for online advertising [17]. - The overall target price of HKD 465.35 corresponds to a PE ratio of 18.6x for 2024 and 16.1x for 2025 [17].