Tianfeng Securities·2024-05-13 01:32Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of 476 HKD, indicating an expected relative return of over 20% within the next six months [12][19]. Core Views - The overall performance for Q1 2024 is projected to show a revenue increase of 4% year-on-year, with gross profit expected to rise by 16% and Non-IFRS net profit anticipated to grow by 28% [12][6]. - The gaming business is expected to recover starting from Q2 2024, driven by the launch of new games and a favorable revenue structure that enhances gross margins [6][12]. - The advertising segment is projected to grow by 18% year-on-year in Q1 2024, supported by the healthy growth of video account traffic and the effective implementation of AI technology [13][12]. Summary by Sections Overall Performance - Q1 2024 revenue is estimated at approximately 156.1 billion HKD, reflecting a 4.1% year-on-year increase, while gross profit is expected to be around 79.3 billion HKD, with a gross margin of 50.8%, up 5.3 percentage points year-on-year [12][6]. - Non-IFRS operating profit is projected to be about 54.1 billion HKD, a 16% increase year-on-year, with an operating margin of 34.7% [12][6]. Gaming Business - The gaming revenue is expected to decline by 2.5% year-on-year in Q1 2024, with domestic revenue down by 4% and overseas revenue up by 2% [12][6]. - The report anticipates a recovery in gaming growth starting in Q2 2024, aided by the release of major new titles and improved performance of existing long-term games [6][12]. Advertising Segment - The advertising revenue is forecasted to grow by 18% year-on-year in Q1 2024, driven by the expansion of video account advertising and the positive impact of AI technology on ad effectiveness [13][12]. - The gross margin for advertising has improved significantly, rising from 36.7% in Q1 2022 to 56.8% in Q4 2023, with a year-on-year growth of 47% in 2023 [13][12]. Shareholder Returns - The company announced a cash dividend of approximately 32 billion HKD for 2023, representing 19% of Non-IFRS net profit, and plans to repurchase shares exceeding 100 billion HKD in 2024 [5][12]. - The potential total shareholder return, considering dividends and share buybacks, is estimated to be around 4.1-4.2% [5][12].