TENCENT(HK:00700)2024-05-23 03:50Investment Rating - The investment rating for Tencent Holdings is "Buy" with a 12-month price target of HK$466, indicating an upside potential of 21.5% from the current price of HK$383.60 [10][91]. Core Insights - Tencent is viewed as one of the most visible and sustainable profit growth setups among China's internet mega caps, driven by game growth acceleration, advertising share gains, and margin expansion at a favorable 15x 2024-25E P/E [40][41]. - The launch of the mobile game "Mobile Dungeon and Fighter" (mDnF) has been particularly successful, ranking No.1 on the China iOS grossing chart on its first day, with an estimated contribution of Rmb7.9 billion in grossing for the first year [58][64]. - Key drivers for Tencent's growth include revenue growth acceleration in the second half of 2024, margin improvement due to quality revenue streams, and increasing recognition of the value of its investment portfolio [41][64]. Summary by Sections Investment Ratings and Relationships - As of April 1, 2024, Goldman Sachs had investment ratings on 2,885 equity securities, with Tencent Holdings included in the "Buy" category [5][10]. Financial Projections - Revenue projections for Tencent are Rmb609,015 million for 2023, increasing to Rmb765,139.7 million by 2026 [91]. - The estimated EBIT contribution from mDnF is projected to be between Rmb2.3 billion and Rmb2.7 billion for the full year, translating to approximately Rmb1.8 billion EBIT in 2024 [64]. Market Position and Competitive Landscape - Tencent's mDnF game is expected to have limited cannibalization between its PC and mobile versions, similar to past successful titles [64]. - The game has embraced a front-loaded monetization approach, targeting its IP fans, which has resulted in strong initial monetization [47][64].