Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700.HK) [1] Core Insights - Tencent's 1Q25 financial results exceeded expectations, with total revenue reaching 180 billion CNY, a year-over-year increase of 13%, surpassing Bloomberg's consensus by 3% [1][8] - The NON-IFRS net profit attributable to shareholders was 61.3 billion CNY, reflecting a year-over-year growth of 22%, also exceeding Bloomberg's consensus by 3% [1][8] - The target price range is set between 545.69 and 606.33 HKD, with the current price at 508.00 HKD [1] Revenue Breakdown - The revenue structure for 1Q25 is as follows: - Gaming: 59.5 billion CNY (33% of total revenue), YOY +24% - Financial Technology and Enterprise Services: 54.9 billion CNY (31% of total revenue), YOY +5% - Social Networks: 32.6 billion CNY (18% of total revenue), YOY +7% - Marketing Services: 31.9 billion CNY (18% of total revenue), YOY +20% [15][26] Business Performance - The gaming segment continues to show strong performance, with both domestic and international markets exceeding expectations. Domestic gaming revenue was 42.9 billion CNY, YOY +24%, while international gaming revenue was 16.6 billion CNY, YOY +23% [20][18] - The social network segment's revenue growth was driven by mobile games, TME membership growth, and mini-game revenue sharing [26] - Marketing services revenue exceeded expectations due to increased user engagement and AI-driven advertising solutions, reaching 31.9 billion CNY, YOY +20% [30] Financial Projections - Revenue forecasts for 2025-2027 have been slightly adjusted to 728.6 billion CNY, 784.5 billion CNY, and 835.6 billion CNY respectively, with year-over-year growth rates of 10%, 8%, and 7% [5] - The NON-IFRS net profit projections for the same period are 256.0 billion CNY, 288.6 billion CNY, and 313.1 billion CNY, with year-over-year growth rates of 15%, 13%, and 9% [5] Capital Expenditure - Capital expenditure (CAPEX) for the quarter reached 23.0 billion CNY, a year-over-year increase of 60%, representing 13% of total revenue [32]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700.HK) [1] Core Views - Tencent's 1Q25 financial results exceeded expectations, with total revenue reaching 180 billion CNY, a year-over-year increase of 13%, surpassing Bloomberg's consensus by 3% [1][8] - The NON-IFRS net profit attributable to shareholders was 61.3 billion CNY, up 22% year-over-year, also exceeding Bloomberg's consensus by 3% [1][8] - The target price range is set between 545.69 and 606.33 HKD, with the current price at 508.00 HKD [1] Financial Performance Summary - Total revenue for 1Q25 was 1800 billion CNY, with a year-over-year growth of 13% [1][8] - NON-IFRS net profit for the same period was 613 billion CNY, reflecting a year-over-year increase of 22% [1][8] - The company achieved a capital expenditure (CAPEX) of 23 billion CNY, a significant year-over-year increase of 60%, representing 13% of total revenue [1][30] Business Segment Performance - **Gaming**: Revenue from the gaming segment reached 595 billion CNY, with a year-over-year growth of 24%, marking the highest growth rate in five quarters [1][18] - **Social Networks**: Revenue from social networks was 326 billion CNY, with a year-over-year increase of 7% [1][26] - **Marketing Services**: This segment generated 319 billion CNY in revenue, reflecting a year-over-year growth of 20% [1][30] - **Financial Technology and Enterprise Services**: Revenue was 549 billion CNY, with a year-over-year growth of 5% [1][32] Future Outlook - The report projects a revenue forecast for 2025-2027 of 7286 billion CNY, 7845 billion CNY, and 8356 billion CNY respectively, with year-over-year growth rates of 10%, 8%, and 7% [5] - The NON-IFRS net profit forecast for the same period is adjusted to 2560 billion CNY, 2886 billion CNY, and 3131 billion CNY, with year-over-year growth rates of 15%, 13%, and 9% [5] Valuation Metrics - The report estimates the EPS for 2025-2027 to be 28.00 CNY, 31.85 CNY, and 34.87 CNY respectively, with corresponding target PE ratios of 18-20x for 2025 [5]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (700 HK) with a target price raised to HKD 604.00, indicating a potential upside of 15.9% from the current price of HKD 521.00 [1][39]. Core Insights - The first quarter performance exceeded expectations, with total revenue growing 13% year-on-year to RMB 180 billion, surpassing market expectations by 4% [2][6]. - The growth was driven by strong performance in domestic games, social networking, and marketing services, with notable contributions from AI investments and cost optimizations in payment and cloud services [6][7]. - The report highlights that the integration of AI across Tencent's business ecosystem is expected to enhance platform traffic and advertising revenue stability [6][7]. Financial Overview - Revenue projections for 2023 to 2027 show a steady increase, with expected revenues of RMB 609 billion in 2023, RMB 660 billion in 2024, and RMB 723 billion in 2025, reflecting a compound annual growth rate (CAGR) of approximately 9.6% [3][42]. - Net profit is projected to grow from RMB 157.7 billion in 2023 to RMB 250.2 billion in 2025, with a significant increase in earnings per share (EPS) from RMB 16.33 to RMB 27.23 over the same period [3][42]. - The report notes an improvement in gross margin, with a projected gross margin of 54.5% for Q2 2025, up from 53.5% in the previous quarter [37]. Segment Performance - Domestic game revenue is expected to continue its rapid growth, with a year-on-year increase of 24% in Q1 2025, supported by a low base from the previous year and the success of new game launches [6][7]. - Social networking revenue grew by 7% year-on-year, driven by increased music subscription services and mobile game in-app purchases [6][7]. - Marketing services revenue saw a significant boost, with video account revenue increasing by over 60% [6][7]. Capital Expenditure and AI Investment - Capital expenditures reached RMB 27.5 billion in Q1 2025, reflecting a 91% year-on-year increase, primarily due to ongoing investments in AI and cloud service infrastructure [6][7]. - The report emphasizes that some of these investments have already started to yield revenue contributions, particularly in advertising optimization and content recommendation algorithms [6][7].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (700 HK) with a target price raised to HKD 604.00, indicating a potential upside of 15.9% from the current price of HKD 521.00 [1][39]. Core Insights - The first quarter performance exceeded expectations, with total revenue growing by 13% year-on-year to RMB 180 billion, surpassing market expectations by 4% [2][6]. - The growth was driven by strong performance in domestic games, social networks, and marketing services, with notable increases in revenue from video accounts and search services [6][7]. - The integration of AI into Tencent's business ecosystem is expected to enhance platform traffic and advertising revenue, contributing to sustained growth [6][7]. Financial Overview - Revenue projections for the upcoming years are as follows: RMB 609,015 million in 2023, RMB 660,257 million in 2024, and RMB 723,532 million in 2025, reflecting a compound annual growth rate of approximately 9.6% [3][42]. - Net profit is projected to increase from RMB 157,688 million in 2023 to RMB 250,235 million in 2025, with a significant year-on-year growth rate of 44.1% in 2024 [3][42]. - The earnings per share (EPS) is expected to rise from RMB 16.33 in 2023 to RMB 27.23 in 2025, indicating a robust growth trajectory [3][42]. Segment Performance - Domestic game revenue grew by 24% year-on-year, supported by a low base from the previous year and the success of new game launches [6][7]. - Social network revenue increased by 7%, driven by growth in paid music subscriptions and mobile game in-app purchases [6][7]. - Marketing services revenue saw a 20% increase, primarily due to strong demand for advertising on video accounts and search services [6][7]. Capital Expenditure and AI Investment - Capital expenditures reached RMB 27.5 billion, a 91% increase year-on-year, reflecting ongoing investments in AI and cloud service infrastructure [6][7]. - The report highlights that some of these investments have already started to yield revenue contributions, particularly in advertising optimization and content recommendation algorithms [6][7].