First Shanghai Securities·2024-05-17 06:32Investment Rating - Target price set at 480 HKD with a buy rating, indicating a potential upside of 20.9% from the last closing price [9][40][57] Core Insights - The company recorded a revenue of 159.5 billion RMB in Q1 2024, representing a year-on-year growth of 6% and a quarter-on-quarter increase of 2.8% [40] - Adjusted net profit for Q1 2024 reached 42.7 billion RMB, a significant increase of 62% year-on-year [40] - The gaming business is showing signs of recovery, with international market revenue growing by 3% to 13.6 billion RMB, while domestic market revenue decreased by 2% to 34.5 billion RMB [41][51] - Advertising revenue in Q1 2024 surged by 26% year-on-year to 26.5 billion RMB, driven by growth in WeChat video accounts and other platforms [44] - Financial technology and enterprise services revenue increased by 7% year-on-year to 52.3 billion RMB, supported by strong growth in wealth management services [42] Revenue Breakdown - For 2024, the projected revenue from value-added services is 313.6 billion RMB, advertising is 119.2 billion RMB, and financial technology and enterprise services is 228.1 billion RMB [20] - The company expects a gross margin of 53% in Q1 2024, up 7.5 percentage points year-on-year [45] - The number of paid value-added accounts reached 260 million, a 12% increase year-on-year [24] Gaming Business Outlook - The upcoming mobile version of "Dungeon & Fighter" is set to launch on May 21, 2024, with strong pre-registration numbers indicating high market interest [29][53] - The company is optimistic about the global gaming industry and is actively seeking investment opportunities [51] Video Account Growth - The WeChat video account has seen significant user engagement, with total usage time increasing by over 80% year-on-year in Q1 2024 [60] - The platform is becoming a key player in the short video industry, with expectations for continued growth in advertising and e-commerce revenue [33][44]