TENCENT(00700) 华兴证券香港·2024-05-21 05:02Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HK381.80 [2][54]. Core Insights - The report highlights a strong performance in the advertising segment, with a year-on-year revenue growth of 26% in Q1 2024, surpassing expectations. This growth is attributed to increased user engagement and improved ad targeting [55]. - The financial technology and enterprise services segment experienced a year-on-year revenue growth of 7% in Q1 2024, although this is a slowdown compared to the mid-double-digit growth in 2023. The management attributes this slowdown to weak offline consumption affecting payment growth [6]. - The report projects a revenue growth of 8% for 2Q24 and 2024, driven by domestic and international gaming revenue growth and improved advertising prospects, partially offset by a slowdown in financial technology revenue [60]. Financial Summary - The report provides a financial outlook with projected revenues and net profits for the years 2024 to 2026. For 2024, the expected revenue is RMB 660,683 million, with a net profit of RMB 199,780 million, translating to an EPS of RMB 20.79 [7]. - The report notes an increase in gross profit margin for the financial technology and enterprise services segment, which rose by approximately 11 percentage points to 45.6% due to a higher proportion of high-margin cloud and video services [6]. Valuation Adjustments - The report adjusts the valuation of the online advertising segment to HK1.1 trillion [14][62]. - The SOTP (Sum of the Parts) valuation for Tencent is detailed, with the cloud and other segments valued at HK$198 billion, based on a 5x P/S for 2024 [34]. Market Comparisons - The report includes a comparison of Tencent's valuation with peer companies, indicating a competitive position in the market [36].