TENCENT(HK:00700) Orient Securities·2025-03-26 05:40Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700.HK) with a target price of 559.92 HKD [3][8]. Core Insights - The report highlights strong growth in advertising driven by AI, alongside robust performance in gaming during the Q1 Spring Festival period [2]. - The forecast for IFRS net profit for 2024-2026 is adjusted to 194.1 billion, 226.1 billion, and 250.1 billion RMB respectively, reflecting an upward revision due to increased advertising and other revenues [3]. - Non-IFRS net profit estimates for the same period are projected at 222.7 billion, 257.6 billion, and 285.6 billion RMB [3]. Financial Performance Summary - For 2024, the expected operating revenue is 660.26 billion RMB, with a year-on-year growth of 8.41% [4]. - The operating profit for 2024 is forecasted at 200.1 billion RMB, representing a year-on-year increase of 30.97% [4]. - The attributable net profit for 2024 is projected at 194.07 billion RMB, showing a significant year-on-year growth of 68.44% [4]. - The gross margin is expected to improve to 52.90% in 2024, while the net margin is anticipated to be 29.39% [4]. - The earnings per share (EPS) for 2024 is estimated at 21.09 RMB [4]. Revenue Breakdown - The report anticipates that value-added services revenue will reach 790 billion RMB in Q4 2024, with a year-on-year growth of 14% [8]. - Gaming revenue for Q4 2024 is expected to be 492 billion RMB, reflecting a year-on-year increase of 20% [8]. - Marketing services revenue is projected at 350 billion RMB for Q4 2024, with a year-on-year growth of 17% [8]. - Financial technology and enterprise services revenue is expected to be 561 billion RMB in Q4 2024, showing a year-on-year increase of 3% [8]. Valuation Metrics - The report employs a Sum-of-the-Parts (SOTP) valuation method, indicating a target price of 559.92 HKD [3][10]. - The estimated price-to-earnings (P/E) ratio for 2025 is projected at 22 times [4][10]. - The price-to-sales (P/S) ratio for 2025 is estimated at 2.5 times [10].