2024-05-16 02:32Investment Rating - The report assigns a "Buy" rating for Tencent Holdings (700 HK) with a target price of HKD 457.00, indicating a potential upside of 19.7% from the current closing price of HKD 381.80 [1][21]. Core Insights - Tencent's Q1 2024 performance showed total revenue of RMB 159.5 billion, reflecting a year-on-year growth of 6% and a quarter-on-quarter increase of 3%, aligning with market expectations. The adjusted net profit reached RMB 50.3 billion, a significant increase of 54% year-on-year, driven by higher revenue contributions from high-margin businesses such as video accounts and WeChat search ads [1][2][7]. - The report anticipates revenue growth rates of 8.2% and 7.8% for 2024 and 2025, respectively, with upward adjustments to gross profit and net profit expectations [2][4]. Financial Performance Summary - Revenue and Profitability: - 2024 projected revenue is RMB 658.7 billion, with a year-on-year growth of 8.2%. The net profit for 2024 is expected to be RMB 202.7 billion, reflecting a growth of 30.3% [4][22]. - The adjusted earnings per share (EPS) for 2024 is forecasted at RMB 21.36, a 30.3% increase compared to the previous year [4][22]. - Valuation Metrics: - The report suggests a price-to-earnings (P/E) ratio of 20 times for core earnings and a price-to-sales (P/S) ratio of 2 times for the cloud business, leading to an increase in the sum-of-the-parts (SOTP) target price to HKD 457.00 [2][4]. - Segment Performance: - The gaming segment is expected to see a recovery with new game launches and increased revenue from existing titles. The advertising segment is projected to grow by 16% in Q2 2024, while enterprise services are expected to grow by 16% as well [7][17]. - Market Position: - Tencent's market capitalization is approximately HKD 3.56 trillion, with a 52-week high of HKD 381.80 and a low of HKD 262.20 [3][21]. Future Outlook - The report indicates a positive outlook for Q2 2024, with expected revenue growth of 7% to RMB 159.9 billion, driven by gaming, advertising, and enterprise services [7][17]. The management's guidance suggests that profit growth will continue to outpace revenue growth, maintaining a favorable trend for investors [7].