TENCENT(00700) 交银国际证券·2024-11-15 01:08Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HKD 513, representing a potential upside of 27.0% from the current price of HKD 403.80 [1][3]. Core Insights - Tencent's Q3 2024 performance showed robust revenue growth of RMB 167.2 billion, up 8% year-on-year and 4% quarter-on-quarter, aligning with market expectations. Key revenue drivers included gaming, social networks, and advertising, with respective growth rates of 13%, 4%, and 17% [1][2][3]. - The adjusted net profit for Q3 2024 reached RMB 59.8 billion, a 33% increase year-on-year, benefiting from high-margin businesses such as domestic gaming and video services [1][3]. - The report anticipates continued growth in Q4 2024, projecting an 8.2% year-on-year revenue increase, driven by domestic gaming and advertising [3]. Revenue and Profitability - Total revenue for Tencent is projected to grow from RMB 609.0 billion in 2023 to RMB 766.8 billion by 2026, with a compound annual growth rate (CAGR) of approximately 8.6% [4]. - The adjusted earnings per share (EPS) is expected to rise from RMB 16.33 in 2023 to RMB 28.35 in 2026, reflecting a strong growth trajectory [4]. - The report highlights a significant improvement in gross margin, which increased to 53% in Q3 2024, driven by cost optimization in cloud services and high-margin business growth [1][3][10]. Segment Performance - The gaming segment saw a 13% year-on-year revenue increase, with domestic games growing by 14% due to the successful launch of new titles and the recovery of existing games [2][6]. - Advertising revenue surged by 17%, fueled by strong demand for video ads and increased spending from the gaming and e-commerce sectors [2][3][15]. - Financial technology and enterprise services remained stable, with slight growth in enterprise service revenue, while payment services faced challenges due to consumer spending impacts [2][14]. Valuation Metrics - The current price corresponds to a price-to-earnings (P/E) ratio of 15.3 times for 2025, which is considered low compared to historical averages [3][4]. - The report suggests that Tencent's strong performance and shareholder returns exceeding RMB 100 billion annually justify the target price of HKD 513, based on a 20 times P/E ratio for 2025 [3][4].