Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [5] Core Views - The report highlights that AI-driven advertising and gaming revenues continue to exceed expectations, with a projected increase in gaming growth rates [1][2] - The forecast for IFRS net profit for 2025-2027 is adjusted to 218.5 billion, 248.4 billion, and 277.8 billion RMB respectively, with non-IFRS net profit projected at 265.3 billion, 298.8 billion, and 334.4 billion RMB [3][10] Financial Performance Summary - For Q1 2025, the company reported revenue of 180 billion RMB, a year-on-year increase of 13% and a quarter-on-quarter increase of 4% [10] - Gross margin for Q1 2025 was 55.8%, up 3.2 percentage points year-on-year [10] - The IFRS net profit for Q1 2025 was 47.8 billion RMB, a year-on-year increase of 12% [10] - The non-IFRS net profit for Q1 2025 was 61.3 billion RMB, reflecting a year-on-year increase of 22% [10] Revenue Breakdown - Q1 2025 value-added services revenue reached 92.1 billion RMB, with gaming revenue at 59.5 billion RMB, showing a year-on-year increase of 24% [10] - The international gaming revenue was 16.6 billion RMB, up 22% year-on-year, while domestic gaming revenue was 42.9 billion RMB, also up 24% year-on-year [10] - Marketing services revenue for Q1 2025 was 31.9 billion RMB, a year-on-year increase of 20% [10] Profitability Metrics - The report projects a gross margin increase to 56.0% in 2025 and 57.0% in 2026 [11] - The net profit margin is expected to stabilize around 29.5% in 2025 and 30.2% in 2026 [11] - Return on equity (ROE) is projected to be 26.1% in 2025 and 26.6% in 2026 [11] Valuation Metrics - The target price for Tencent Holdings is set at 539.10 HKD, with a price-to-earnings (P/E) ratio projected to decrease from 38 in 2023 to 16 in 2027 [3][16] - The price-to-book (P/B) ratio is expected to decline from 5 in 2023 to 3 in 2027 [16]