Investment Rating - The investment rating for Tencent Holdings Ltd. is "Overweight" with an attractive industry view [5][70]. Core Insights - The report indicates a modest upside and a modest revision higher in the earnings forecast, strengthening the overall investment thesis [2][7]. - Tencent's total revenues for 1Q25 reached RMB 180.022 billion, representing a year-over-year increase of 12.9% and beating consensus estimates by 2.6% [3][7]. - The gaming segment showed significant growth, with online games revenue increasing by 23.7% year-over-year, surpassing consensus by 7.6% [3][7]. - Gross profit rose by 19.8% year-over-year, with a gross margin of 55.8%, an increase of 3.2 percentage points compared to the previous year [3][7]. - Non-IFRS net profit increased by 22% year-over-year, also exceeding consensus expectations by 4% [3][7]. Financial Performance Summary - **Revenue Breakdown**: - Value-Added Services (VAS) revenue was RMB 92.133 billion, up 17.2% year-over-year, with online games contributing RMB 59.5 billion [3]. - Online advertising revenue was RMB 31.853 billion, reflecting a 20.2% increase [3]. - FinTech and Business Services revenue was RMB 54.907 billion, a 5% increase [3]. - **Profitability Metrics**: - Operating profit (Non-IFRS) reached RMB 69.320 billion, an 18.3% increase year-over-year [3]. - The diluted EPS for 1Q25 was RMB 5.1, a 16.9% increase year-over-year [3]. - **Future Projections**: - The fiscal year 2025 revenue is projected to be RMB 726 billion, with an expected EPS of RMB 23.30 [5][70]. Valuation and Price Target - The price target for Tencent Holdings Ltd. is set at HK$630.00, indicating a potential upside of 21% from the current price of HK$521.00 [5]. - The valuation methodology includes a discounted cash flow (DCF) approach with a 10% discount rate and a 3% terminal growth rate [8][9].