Orient Securities·2024-05-20 00:32Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [2][9]. Core Insights - In Q1 2024, Tencent's online advertising revenue reached 26.5 billion (yoy +26.4%, qoq -11%), driven by significant growth in video account advertising, mini-program advertising, and long video advertising due to increased user engagement and AI-driven advertising technology [1][2]. - Financial technology and enterprise services revenue was 52.3 billion (yoy +7.4%, qoq -3.8%), with strong growth in wealth management services, although offline consumption spending slowed [1][2]. - The company expects new game launches, including "DNF" in Q2, to contribute to revenue growth, alongside enhanced monetization expectations for "Peacekeeper Elite" and "Honor of Kings" from Q2 to Q4 [2][6]. Financial Performance Summary - Q1 2024 total revenue was 159.5 billion (yoy +6.3%, qoq +2.8%), with a gross margin of 52.58% (yoy +7.1pp, qoq +2.6pp) [6][12]. - The IFRS net profit for Q1 2024 was 41.9 billion (yoy +62.1%, qoq +55%), while the Non-IFRS net profit was 50.3 billion (yoy +54.5%, qoq +17.8%) [6][12]. - Value-added services revenue was 78.6 billion (yoy -0.9%, qoq +13.8%), with international game revenue at 13.6 billion (yoy +2.7%, qoq -2.2%) and domestic game revenue at 34.5 billion (yoy -1.7%, qoq +27.8%) [6][12]. Earnings Forecast - The forecast for IFRS net profit from 2024 to 2026 is 165.7 billion, 188.4 billion, and 218.0 billion respectively, with Non-IFRS net profit expected to be 211.0 billion, 241.8 billion, and 276.1 billion [2][8]. - The report adjusts the profit forecast upwards due to better-than-expected performance in value-added services, advertising, and investment income [2][8]. Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, setting a target price of 415.62 HKD, which corresponds to 378.46 RMB [2][9].