TENCENT(HK:00700) Guoxin Securities·2025-05-16 10:20Investment Rating - The investment rating for Tencent Holdings is "Outperform the Market" [4][35]. Core Insights - Tencent's revenue for Q1 2025 reached 180 billion RMB, representing a year-on-year growth of 13%, driven primarily by strong performance in advertising and gaming sectors [1][9]. - Adjusted operating profit for Q1 2025 was 69.3 billion RMB, a year-on-year increase of 18%, with Non-IFRS net profit at 61.3 billion RMB, up 22% year-on-year [1][9]. - The company is leveraging AI capabilities to enhance existing businesses and explore new opportunities, particularly within its WeChat ecosystem [2][15]. Revenue Breakdown - Gaming revenue for Q1 2025 was 59.5 billion RMB, showing a year-on-year increase of 23.7%, with domestic gaming revenue up 24% to 42.9 billion RMB [2][20]. - Advertising revenue for Q1 2025 was 31.9 billion RMB, reflecting a year-on-year growth of 20%, driven by increased traffic and enhanced AI models [3][28]. - Financial technology and enterprise services revenue grew by 5% year-on-year to 54.9 billion RMB, with a recovery in growth rates observed [4][29]. Future Projections - The report maintains profit forecasts for Tencent, expecting adjusted net profits of 252.5 billion RMB, 283.2 billion RMB, and 312.9 billion RMB for 2025, 2026, and 2027 respectively [7][35]. - The estimated reasonable valuation range for Tencent's stock is between 610.00 and 661.00 HKD, with a closing price of 520.00 HKD [4][35]. Financial Metrics - The company's comprehensive gross margin for Q1 2025 was 56%, an increase of 3 percentage points year-on-year, with improvements across various business segments [1][9]. - The report projects a steady increase in revenue, with expected growth rates of 8.4%, 10.6%, and 7.0% for the years 2024, 2025, and 2026 respectively [8].