TENCENT(00700)2025-03-20 09:41Investment Rating - The report maintains a "Buy" rating for Tencent with a target price of 700 HKD, representing a potential upside of 30% from the current price of 540 HKD [4][7]. Core Insights - Tencent's Q4 2024 revenue reached 172.5 billion RMB, a year-on-year increase of 11%, exceeding market expectations by 2.3%. The gross margin improved to 52.6%, up 3 percentage points year-on-year, with adjusted net profit growing by 30% to 55.3 billion RMB [2][4]. - The report highlights strong performance in domestic gaming, with Q4 2024 revenue up 23% to 33.2 billion RMB, driven by low base effects and healthy performance of flagship games. International gaming revenue also grew by 15% to 16 billion RMB [3][4]. - Tencent is increasing its investment in AI, with Q4 2024 capital expenditure related to AI at 39 billion RMB, and plans to continue this trend in 2025, targeting a capital expenditure of approximately 90 billion RMB [4][6]. Financial Performance Summary - For FY23, Tencent reported total revenue of 608.94 billion RMB, with projections for FY24 at 659.62 billion RMB and FY25 at 724.40 billion RMB. Adjusted net profit is expected to grow from 157.61 billion RMB in FY23 to 238.35 billion RMB in FY25 [6][13]. - The report forecasts a steady increase in operating profit, with FY24 projected at 211.79 billion RMB and FY25 at 237.44 billion RMB, reflecting a positive growth trajectory [6][13]. - Key financial ratios indicate an improvement in profitability, with adjusted net profit margin expected to rise from 25.9% in FY23 to 32.9% in FY25 [6][13].