TENCENT(HK:00700) BOCOM International·2025-03-26 12:23Investment Rating - The report assigns a "Buy" rating for Tencent Holdings (700 HK) with a target price of HKD 583.00, indicating a potential upside of 16.1% from the current price of HKD 502.00 [1][4][31]. Core Insights - Tencent's evergreen games contribute approximately 20% to the total revenue, with a significant focus on MOBA and shooting genres, showing strong overseas growth that outpaces the industry [2][8]. - The company is expected to maintain its leading position in the gaming industry, with a projected 9% revenue growth in 2025, contributing 30% to total revenue [17][22]. - Tencent's market share in the domestic market remains stable at around 55%, while overseas gaming revenue is expected to grow at a compound annual growth rate of 11% from 2022 to 2024 [22][24]. Financial Overview - Revenue projections for Tencent are as follows: - 2023: RMB 609,015 million - 2024: RMB 660,257 million - 2025E: RMB 713,818 million - 2026E: RMB 767,880 million - 2027E: RMB 818,920 million - The year-on-year growth rates are projected to be 9.8% for 2023, 8.4% for 2024, and gradually declining to 6.6% by 2027 [3][32]. - Net profit estimates are as follows: - 2023: RMB 157,688 million - 2024: RMB 222,703 million - 2025E: RMB 244,774 million - 2026E: RMB 268,648 million - 2027E: RMB 289,453 million - Earnings per share are projected to increase from RMB 16.33 in 2023 to RMB 31.91 in 2027 [3][32]. Game Performance and Strategy - Tencent's evergreen games are expected to maintain a strong revenue contribution, with 12 to 14 titles projected for 2023/24, generating an estimated RMB 1,300 to 1,400 billion in revenue [8][11]. - The company has a robust pipeline of new games, with over 25 titles in development, many based on popular IPs, which are expected to foster the growth of more evergreen games [11][12]. - The anticipated performance of new titles such as "Dungeon & Fighter: Origin" and "Delta Force" is expected to significantly contribute to revenue streams [11][12]. Market Position - Tencent's gaming division is expected to see a revenue increase of 9% in 2025, with domestic and overseas games projected to grow by 8% and 12% respectively [17][22]. - The report highlights the differentiation in game genres among competitors, with Tencent focusing on MOBA and shooting games, while others like NetEase and miHoYo target MMORPG and RPG genres [14][15].