HTSC·2025-11-20 01:30Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 89.40, up from the previous HKD 85.28 [7][5][23]. Core Insights - The company's Q3 performance slightly exceeded expectations, with revenue growth of 13% year-on-year to RMB 35.6 billion, surpassing consensus estimates by 1% [1]. - The adjusted net profit for Q3 increased by 26% year-on-year to RMB 5 billion, exceeding expectations by 2.3% [1]. - The management anticipates that the revenue for the company's AI product, 可灵, could reach USD 1.4 billion by 2025 [1]. - The report highlights a slowdown in e-commerce monetization, despite a strong performance in advertising and live streaming [1][5]. Summary by Sections Q3 Performance - Revenue for Q3 was RMB 35.6 billion, a 13% increase year-on-year, with a gross margin improvement of 0.3 percentage points to 54.7% [1]. - Adjusted net profit rose 26% year-on-year to RMB 5 billion, exceeding expectations by 2.3% [1]. - Revenue breakdown: live streaming, advertising, and e-commerce grew by 3%, 14%, and 41% respectively [1]. Advertising and E-commerce - Q3 advertising revenue increased by 14%, slightly above expectations, with a 16% growth when excluding overseas revenue [3]. - E-commerce and other revenues accelerated by 41% year-on-year, with GMV growth of 15% [4]. - The company invested RMB 18 billion in platform traffic incentives during the Double 11 shopping festival, which met expectations [4]. Future Outlook - Revenue forecasts for 2025-2027 have been adjusted, with a slight decrease of 0.6% for 2025 due to slowing e-commerce consumption, while 2026-2027 forecasts were increased due to AI-driven advertising growth [5][19]. - The adjusted net profit estimates for 2025, 2026, and 2027 are RMB 20.6 billion, RMB 22.1 billion, and RMB 25.8 billion respectively [5][19]. Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, assigning a per-share value of HKD 89.40, reflecting the potential for increased revenue contributions from the AI product [23][24]. - The valuation for the advertising business is set at HKD 68.96 per share, while e-commerce and live streaming are valued at HKD 11.41 and HKD 9.02 per share respectively [23].