TENCENT(HK:00700)2024-10-15 16:16Investment Rating - The report assigns a "Buy" rating for Tencent Holdings (700 HK) with a target price of HKD 513.00, indicating a potential upside of 16.9% from the current price of HKD 438.80 [1][3][18]. Core Insights - The report highlights that mobile gaming continues to show robust growth, with profit growth expected to outpace revenue growth [1]. - Domestic mobile game revenue is projected to grow by 15% year-on-year in Q3 2024, accelerating from 10% growth in the first half of the year [2]. - The report anticipates that Tencent will maintain a trend of profit growth exceeding revenue growth due to ongoing cost control and operational leverage [2]. Financial Summary - Revenue (in million RMB): - 2022: 554,552 - 2023: 609,015 - 2024E: 657,575 - 2025E: 721,654 - 2026E: 768,333 - Year-on-year growth rates: - 2023: 9.8% - 2024E: 8.0% - 2025E: 9.7% - 2026E: 6.5% [3][19]. - Net Profit (in million RMB): - 2022: 115,649 - 2023: 157,688 - 2024E: 207,933 - 2025E: 229,754 - 2026E: 257,385 - Year-on-year growth rates: - 2023: 37.6% - 2024E: 34.4% - 2025E: 12.1% - 2026E: 13.2% [3][19]. - Earnings Per Share (in RMB): - 2022: 11.86 - 2023: 16.33 - 2024E: 21.94 - 2025E: 24.60 - 2026E: 27.84 [3][19]. Revenue Breakdown - Domestic mobile game revenue is expected to grow by 15% year-on-year in Q3 2024, driven by new game contributions [2]. - Overseas mobile game revenue is projected to grow by 18% year-on-year in Q3 2024, supported by Supercell's "Brawl Stars" [2]. - Advertising revenue growth is expected to be 16% year-on-year in Q3 2024, slightly down from previous expectations due to budget adjustments by advertisers [2]. Valuation and Outlook - The report maintains net profit expectations for 2024/25 and adjusts the valuation to 20 times the earnings for 2025, raising the target price to HKD 513.00 from HKD 486.00 [2].