Soochow Securities·2024-05-18 15:02Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for the stock over the next 6 to 12 months [11][13]. Core Insights - The company's revenue for Q1 2024 reached 159.5 billion RMB, representing a year-on-year increase of 6.3%, surpassing Bloomberg's consensus estimate of 158.8 billion RMB [11][40]. - The non-IFRS net profit for Q1 2024 was 50.3 billion RMB, reflecting a year-on-year growth of 55%, also exceeding the expected 43 billion RMB [11][40]. - The overall gross margin improved to 52.58%, up 7 percentage points year-on-year and 3 percentage points quarter-on-quarter, driven by the rapid growth of high-margin revenue sources [2][57]. Summary by Sections 1. Revenue Growth and Profitability - Domestic gaming revenue was 34.5 billion RMB, down 2% year-on-year but up 28% quarter-on-quarter, exceeding expectations [11][24]. - International gaming revenue was 13.6 billion RMB, up 3% year-on-year, aligning with market expectations [11][25]. - Social network revenue was 30.5 billion RMB, down 2% year-on-year but up 8% quarter-on-quarter, meeting expectations [11][48]. - Advertising revenue reached 26.5 billion RMB, up 26% year-on-year, surpassing the expected 24.8 billion RMB [11][30]. - Financial technology and enterprise services revenue was 52.3 billion RMB, up 7% year-on-year but below the expected 55.1 billion RMB [11][68]. 2. Margin Improvement - The gross margin increase was attributed to the growth of high-margin revenue sources, including WeChat, video accounts, and search advertising [2][57]. - The gross margin for financial technology and enterprise services was 46%, up 11 percentage points year-on-year [2][58]. - The advertising business gross margin was 55%, up 13 percentage points year-on-year, primarily due to the growth in WeChat video accounts and search advertising [2][74]. 3. Expense Management - Sales expenses for Q1 2024 were 7.5 billion RMB, a 7% increase year-on-year, while management expenses were 24.8 billion RMB, up 1% year-on-year but down 9% quarter-on-quarter [2][76]. - The management expense ratio decreased by 0.9 percentage points year-on-year, indicating improved cost management [2][76]. 4. Earnings Forecast - The adjusted net profit estimates for 2024-2026 have been revised to 193.2 billion, 235.7 billion, and 266.3 billion RMB, respectively, with corresponding PE ratios of 18, 15, and 13 times [11][13].