Tencent Holdings Equity Research Summary Company Overview - **Company**: Tencent Holdings Limited - **Industry**: Internet and Online Services in the People's Republic of China (PRC) - **Segments**: Internet value-added services, mobile and telecommunications value-added services, online advertising, and others [23][24] Key Financial Metrics - **Revenue Growth**: Expected total revenue growth of approximately 9.7% YoY to about RMB 177 billion in 2Q [2][15] - **Online Games Revenue**: Anticipated increase of about 12% YoY to approximately RMB 54.4 billion, driven by evergreen titles [2][15] - **Marketing Services Revenue**: Expected to grow about 17% YoY to RMB 35 billion, supported by traffic growth from video accounts and AI improvements [2][15] - **Fintech and Business Services (FBS)**: Estimated revenue growth of 7% YoY to RMB 54 billion [2][15] - **Non-IFRS Operating Profit**: Projected to grow 13% to about RMB 66 billion [2][15] - **Non-IFRS Earnings**: Expected to reach about RMB 62.5 billion, largely unchanged [2][15] Core Insights and Strategies - **AI Strategy**: The company maintains a robust AI strategy across various segments, which is expected to enhance operational efficiency and revenue generation [2][3][15] - **Gaming Strategy**: Focus on rejuvenating existing games and developing new franchises, with Delta Force achieving a record peak DAU of 12 million in April 2025 [2][3][15] - **Advertising Outlook**: Multiple growth drivers identified, including increased ad loads on Video Accounts and improvements in click-through rates (CTR) due to AI [2][3][15] - **Fintech Focus**: Emphasis on risk management within fintech operations, with a positive outlook on commercial payment trends [3][15] Investment Thesis - **Rating**: Buy - **Price Target**: HK$ 665, representing a potential upside of 34% from the current price of HK$ 497.60 [6][15] - **Valuation Methodology**: Based on a sum-of-the-parts (SOTP) valuation approach [15][24] - **Risks**: Include unsuccessful launches of new games, slower-than-expected growth in online ads, and aggressive investments in new initiatives [18][24] Sustainability and Corporate Responsibility - **Carbon Neutrality Goal**: Pledged to achieve carbon neutrality across operations and supply chains by 2030 [12][13] - **Data Security and Employee Engagement**: Prioritizing data security and employee diversity as key material issues [12][13] Conclusion Tencent Holdings is positioned for solid growth driven by its diverse revenue streams, strong gaming portfolio, and strategic investments in AI and fintech. The company’s commitment to sustainability and risk management further enhances its long-term investment appeal.