Huachuang Securities·2024-05-19 06:02Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HKD 464.84, compared to the current price of HKD 395.00 [6][7]. Core Insights - The company reported a revenue of CNY 159.5 billion for Q1 2024, representing a year-over-year (YOY) increase of 6% and a quarter-over-quarter (QOQ) increase of 3%, which met expectations. The gross profit was CNY 83.9 billion, with a YOY increase of 23% and a QOQ increase of 8%, resulting in a gross profit margin (GPM) of 53%, up 7 percentage points YOY and 3 percentage points QOQ. The NON-IFRS net profit attributable to shareholders was CNY 50.3 billion, a significant YOY increase of 54% and a QOQ increase of 18%, exceeding expectations [12][5]. Summary by Sections Q1 2024 Financial Results - Revenue met expectations at CNY 159.5 billion, with a YOY increase of 6% and QOQ increase of 3. Gross profit reached CNY 83.9 billion, with a GPM of 53%, reflecting a strong operational efficiency and revenue quality improvement [12][5]. - The company transitioned from cost-cutting to enhancing operational efficiency, leading to a significant increase in gross profit growth outpacing revenue growth [12]. Business Segment Performance - Overseas Gaming: Revenue from international gaming was CNY 13.6 billion, a YOY increase of 3%, driven by the recovery of Supercell's games. The overall revenue from overseas gaming is expected to grow as the revenue recognition cycle for Supercell is longer [38]. - Domestic Gaming: Revenue was CNY 34.5 billion, a slight YOY decrease of 2%, but the revenue stream showed a positive growth of 2% YOY in Q1 2024, indicating recovery [34]. - Social Networks: Revenue was CNY 30.5 billion, a YOY decrease of 2%, but the number of paid users increased by 12% YOY, driven by quality content [12]. - Advertising: Revenue reached CNY 26.5 billion, a YOY increase of 26%, exceeding expectations, primarily from the WeChat ecosystem [19]. - Financial Technology and Enterprise Services: Revenue was CNY 52.3 billion, a YOY increase of 7%, with a GPM of 45.6%, marking a historical high [12]. Future Outlook - The company expects continued growth in its gaming and advertising segments, with several new game launches planned for the upcoming quarters, indicating a positive outlook for revenue recovery [23][34]. - The report projects revenue for 2024 to reach CNY 674 billion, with a YOY growth of 11%, and NON-IFRS net profit to reach CNY 199.2 billion, reflecting a YOY growth of 26% [7].