TENCENT(HK:00700) Minsheng Securities·2024-11-08 01:18Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700.HK) [3]. Core Views - The gaming industry is experiencing a recovery in market sentiment, driven by stable regulatory policies and improved supply of game licenses, with significant revenue growth expected in the coming years [1][11]. - Tencent's domestic evergreen games are performing well, and its overseas growth targets remain solid, with a focus on expanding its global distribution capabilities [1][25]. - The report forecasts Tencent's revenue for 2024, 2025, and 2026 to be 659.1 billion, 715.4 billion, and 773.0 billion RMB respectively, with adjusted net profits of 214.6 billion, 240.4 billion, and 260.0 billion RMB [2][3]. Summary by Sections 1. Gaming Industry: Policy Risks Easing and Market Sentiment Recovering - The gaming industry in China is showing signs of recovery, with a 13.9% year-on-year increase in actual sales revenue in 2023, reaching 302.96 billion RMB [7]. - The number of game licenses issued has significantly improved, with 1,072 domestic and 90 imported game licenses granted by the end of October 2024, surpassing previous years [11][12]. - The average revenue per user (ARPU) for games has increased, with mobile game ARPU growing by 17.1% in 2023 [7]. 2. Company Gaming Business: Strong Domestic Performance and Stable Overseas Growth - Tencent's domestic evergreen games are seeing a revenue rebound, with flagship titles like "Honor of Kings" and "Peacekeeper Elite" benefiting from gameplay updates [1]. - The new game "MDnF" is expected to significantly contribute to revenue in the second half of 2024 [1]. - Tencent's global distribution capabilities are expanding, with successful titles like "PUBG Mobile" and "Brawl Stars" maintaining strong performance in international markets [1][25]. 3. Profit Forecast and Investment Recommendations - The report projects Tencent's revenue and adjusted net profit growth for the next three years, with corresponding price-to-earnings ratios of 17X, 15X, and 14X for 2024, 2025, and 2026 respectively [2][3]. - The investment recommendation is based on the anticipated recovery in the gaming market and Tencent's strong position within it [1][3].