TENCENT(00700) 光大证券·2024-03-19 16:00Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (0700 HK) with a target price of 430 HKD [3] Core Views - Despite the underperformance of "Dream Star" (Yuan Meng Zhi Xing), Tencent's competitive advantage in high-DAU games remains intact [3] - Tencent has multiple high-potential games scheduled for release in 2024 and beyond, including "DNF Mobile," "Assassin's Creed Jade," and "Delta Force" [3] - Tencent's 3Q23 Non-IFRS net profit showed significant growth, and the company is expected to benefit from cyclical recovery and operational leverage optimization [3] - The report forecasts Tencent's Non-IFRS net profit for 2023-2025 at 1,543 3B, 1,843 5B, and 2,042 3B RMB, respectively, with corresponding Non-IFRS P/E ratios of 17x, 14x, and 13x [3] Financial Performance - Revenue is projected to grow from 5,601 2B RMB in 2021 to 7,488 7B RMB in 2025, with a CAGR of 7 6% [6] - Non-IFRS net profit is expected to increase from 1,237 9B RMB in 2021 to 2,042 3B RMB in 2025, with a CAGR of 13 2% [6] - Operating cash flow is forecasted to rise from 1,752B RMB in 2021 to 2,264B RMB in 2025 [6] Game Business Analysis - "Dream Star" initially performed well but saw a decline in revenue during the Spring Festival period, with daily estimated revenue dropping to 223K USD in February 2024, compared to "Eggy Party's" 880K USD [55] - "Dream Star" has an older user base compared to "Eggy Party," with 25 77% of users aged 24-30, while "Eggy Party" has a higher female user ratio at 61% [12][58] - Tencent's game pipeline for 2024 includes "DNF Mobile," which is expected to contribute stable profits, and "Assassin's Creed Jade," a mobile adaptation of the popular IP [3][86] Market Competition - "Eggy Party" has a more established player community and richer UGC content, giving it an edge over "Dream Star" [100] - The competition between Tencent and NetEase in the party game segment has raised the ceiling for the genre, with new entrants expected to explore niche markets [73] Future Outlook - Tencent's game business is expected to benefit from the release of high-potential titles like "DNF Mobile" and "Assassin's Creed Jade," which could drive revenue growth and restore market confidence [3][86] - The company's investment in game development and overseas expansion, particularly through Level Infinite, is expected to strengthen its position in the global gaming market [88][110]