Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (700 HK) with a target price of HK$520.00, implying a 37% upside from the current price of HK$380.00 [1][2] Core Views - Tencent is well-positioned for sustained strong performance in 2025, driven by robust growth in its gaming and advertising segments [7] - The company's gaming revenue is expected to grow by 16% YoY in 4Q24 and 8% YoY in 2025, supported by evergreen titles and new releases like *Dungeon & Fighter Mobile* [8] - Advertising revenue is projected to grow 15% YoY in 4Q24 and 2025, with video ads and WeChat Channels gaining market share [9] - Fintech and business services revenue is forecasted to grow 5% YoY in 2025, driven by economic recovery and new tools like WeChat Mini Shops [9] Financial Performance - Tencent's adjusted operating profit margin is expected to expand to 34.7% in 4Q24 and 37.9% in 2025, supported by a shift towards higher-margin businesses [10] - The company's adjusted net profit margin is projected to rise to 30.3% in 4Q24 and 34.1% in 2025 [10] - Revenue is forecasted to grow 9% YoY in 4Q24 and 8% YoY in 2025, with net income reaching RMB 240.9 billion in 2025 [20][21] Gaming Segment - Domestic gaming revenue is expected to grow 16% YoY in 4Q24, driven by strong performance of *Dungeon & Fighter Mobile* and deferred revenue of over RMB 100 billion [8] - International gaming revenue is projected to grow 17% YoY in 4Q24, supported by the release of *Path of Exile 2* and contributions from Supercell's *Brawl Stars* [8] - Tencent's gaming pipeline includes titles like *Honor of Kings World* and *Valorant Mobile*, set for release in 2025 [17] Advertising Segment - Social advertising revenue is expected to grow 16% YoY in 4Q24, while media advertising revenue is forecasted to grow 4% YoY [9] - WeChat Channels and video ads are gaining market share, contributing to the segment's outperformance [9] Valuation - The SOTP valuation for Tencent is HK$5.4 trillion, with the gaming segment valued at HK$1.6 trillion (18x 2025E P/E) and the advertising segment at HK$1.2 trillion (18x 2025E P/E) [23][24] - The target price of HK$520.00 is based on a 19x 2025E P/E multiple [10][23] Peer Comparison - Tencent's 2025E P/E of 14.0x is lower than global gaming peers like EA (17.0x) and Take-Two (21.3x) [25] - The company's 2025E P/S of 4.7x is higher than cloud service peers like Alibaba (1.4x) and Baidu (1.5x) [25]

Investment Rating - Tencent Holdings maintains a "Buy" rating [4] Core Views - The inclusion of Tencent in the 1260H list by the US Department of Defense has limited direct impact on the company's operations [2] - The 1260H list does not authorize any direct restrictions on the listed companies, but indirect effects in financing and supply chain areas should be monitored [2] - There is a possibility that Tencent could be added to the NS-CMIC list, which would restrict US entities from trading its securities [3] - Tencent may face supply chain challenges due to potential classification as a "military end-user" under US export control regulations [3] - Historical precedents suggest that Tencent could potentially be removed from the 1260H list through appeals, as seen with Xiaomi in 2021 [3] Financial Projections and Valuation - Revenue is projected to grow from CNY 609,015 million in 2023 to CNY 795,437 million in 2026, with a CAGR of 9.24% [6] - Net profit attributable to the parent company is expected to increase from CNY 115,216 million in 2023 to CNY 216,284 million in 2026, with a CAGR of 23.45% [6] - Earnings per share (EPS) are forecasted to rise from CNY 12.19 in 2023 to CNY 23.45 in 2026 [6] - The P/E ratio is expected to decline from 22.65x in 2023 to 16.41x in 2026, indicating improving valuation metrics [6] Financial Ratios and Performance - Gross margin is projected to improve from 48.13% in 2023 to 55.18% in 2026 [12] - Return on Equity (ROE) is expected to increase from 14.25% in 2023 to 17.78% in 2024, before slightly declining to 16.33% in 2026 [12] - The debt-to-asset ratio is forecasted to decrease from 44.61% in 2023 to 38.12% in 2026, reflecting a stronger balance sheet [12] - The current ratio is expected to improve from 1.47 in 2023 to 2.43 in 2026, indicating better liquidity [12] Market and Industry Context - Tencent's stock price closed at HKD 409.40, with a 12-month price range of HKD 257.97 to HKD 482.40 [7] - The company's market capitalization stands at HKD 3,724.8 billion [7] - Tencent's performance is compared to the Hang Seng Tech Index, with a recent underperformance of -17.00% [9]

Investment Rating - The investment rating for Tencent Holdings is "Outperform the Market" (maintained) [1][5][20]. Core Views - Tencent is expected to achieve revenue of 169.2 billion yuan in Q4 2024, representing a year-on-year growth of 9%. The growth is driven by stable growth in online advertising and an increase in gaming revenue [3][6]. - The gaming segment is projected to generate 47 billion yuan in revenue, reflecting a 15% year-on-year increase, with domestic game revenue expected to grow by 17% [3][10]. - The advertising revenue is anticipated to reach 34.3 billion yuan, marking a 15% increase year-on-year, supported by the growth of video accounts and improvements in advertising technology [4][15]. - Financial technology and enterprise services revenue is expected to grow by 3% year-on-year, reaching 56 billion yuan, influenced by macroeconomic conditions [16][20]. Summary by Sections Revenue Forecast - For Q4 2024, Tencent's total revenue is projected at 169.2 billion yuan, with a breakdown as follows: - Value-added services: 76.3 billion yuan, up 10% year-on-year - Online games: 47 billion yuan, up 15% year-on-year - Advertising: 34.3 billion yuan, up 15% year-on-year - Financial technology and enterprise services: 56 billion yuan, up 3% year-on-year [8][24]. Profitability - Non-IFRS net profit for Q4 2024 is expected to be 54.5 billion yuan, reflecting a 28% year-on-year increase, with a net profit margin of 32% [4][7][20]. Key Growth Drivers - The gaming segment is benefiting from the release of new games and updates to existing titles, with "DNF" showing strong performance in the iOS rankings [3][10]. - The advertising segment is expected to leverage AI and improved ad technology, with significant potential in WeChat e-commerce, which could generate approximately 50 billion yuan in advertising revenue in the medium term [4][15]. - The financial technology segment is facing challenges due to macroeconomic factors, but is still expected to show modest growth [16][20].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HKD 492.22 [6][26] Core Views - Tencent's 4Q24 revenue is expected to grow by 8% YoY, with adjusted net profit increasing by 25% to RMB 53.5 billion [1] - Domestic gaming revenue is projected to accelerate by 18% YoY, while advertising revenue growth may slow to 13% due to the Olympics [1] - Financial technology revenue is expected to recover to 4% growth in 4Q24 [1] - Key catalysts for 2025 include the launch of new AI features, increased ad load rates on Video Accounts, and the expected monthly gross revenue of RMB 5-10 billion from the mobile game "Valorant" [1] Business Segments Advertising - 4Q24 advertising revenue growth is expected to slow to 13% YoY due to the Olympics and delayed recovery effects [2] - Ad load rates on Video Accounts have stabilized at 3-4%, with potential for further growth [2] - The integration of WeChat Mini Stores with public and private domain traffic is expected to drive GMV growth, with a projected GMV of RMB 500 billion in 2025 [2][11] Gaming - 4Q24 gaming revenue is expected to grow by 16% YoY, with domestic and overseas gaming revenue increasing by 18% and 13% respectively [3] - New game releases with longer deferred revenue cycles are expected to positively impact 4Q24 results [3] - Key games to watch include "DnF Mobile" and the upcoming "Honor of Kings: World" and "Valorant Mobile" [3] Financial Technology - Financial technology revenue is expected to grow by 4% YoY in 4Q24, driven by the recovery of offline payment services [2] - WeChat Search has started displaying products from WeChat Mini Stores, and the "Gift Sending" feature is expected to drive further growth [2][11] AI and Technological Innovations - Tencent is expected to launch new AI features in 2025, which could enhance mobile applications and improve user stickiness [1] - Tencent's AI-powered advertising tool, "Miaosi," has shown significant improvements in ad performance, with a 30% increase in Video Account ad spend during the Double 11 period [16] - Tencent's open-source MoE model, "Hunyuan Large," and 3D generation model, "Hunyuan 3D-1.0," are expected to drive innovation in AI applications [17][19] Financial Projections - Revenue forecasts for 2024-2026 have been slightly adjusted, with expected revenues of RMB 655.3 billion, RMB 712.8 billion, and RMB 785.1 billion respectively [4][22] - Adjusted net profit forecasts for 2024-2026 have been revised to RMB 220.9 billion, RMB 247.2 billion, and RMB 280.9 billion, reflecting high-margin business base effects [4][22] Valuation - The SOTP valuation for Tencent is HKD 492.22, based on a sum-of-the-parts analysis [26] - The valuation includes contributions from gaming, social networks, online advertising, financial technology, and enterprise services, with gaming contributing the largest share at 37.5% [26] Industry Comparison - Tencent's gaming and advertising businesses are compared to global peers, with Tencent's gaming PE at 14.2x, lower than the global average of 20.2x, and advertising PE at 13.8x, lower than the global average of 21.8x [26][28]

Investment Rating - The investment rating for Tencent Holdings is "Buy" with a current price of HKD 380.00 and a fair value of HKD 478.52 [5][20]. Core Views - The report anticipates a strong performance in gaming, resilient advertising, and a recovery in financial services for Tencent in Q4 2024. The expected revenue for Q4 2024 is RMB 169.1 billion, representing a year-over-year increase of 9% [9][20]. - The gaming revenue is projected to accelerate, with expectations of reaching RMB 46.6 billion in Q4 2024, a 14% year-over-year increase. Domestic gaming is expected to grow by 16% while overseas gaming revenue is projected to increase by 10% [9][20]. - The report maintains a positive outlook on Tencent's core business driven by product innovation and social media traffic, suggesting that the company can gradually release its commercialization potential through innovations like WeChat stores [9][20]. Summary by Sections Earnings Forecast - The report provides a detailed earnings forecast for Tencent from 2022 to 2026, with revenue expected to grow from RMB 5,546 million in 2022 to RMB 7,685 million in 2026, reflecting a compound annual growth rate (CAGR) of approximately 7.8% [4][20]. - Non-GAAP net profit is projected to increase from RMB 1,149 million in 2022 to RMB 2,775 million in 2026, with a significant growth rate of 45.3% in 2024 [4][20]. Financial Metrics - The report highlights key financial metrics, including an expected EPS of RMB 24.10 in 2024, with a P/E ratio of 14.5, and a projected ROE of 22.4% [4][20]. - The EBITDA is forecasted to grow from RMB 1,612 million in 2022 to RMB 3,379 million in 2026, indicating a strong operational performance [4][20]. Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, estimating the core business value at HKD 404 billion and the investment business value at HKD 37.23 billion, leading to a total fair value of HKD 478.52 per share [17][20]. - The gaming business is valued at HKD 189.74 per share based on an 18x P/E ratio, while the advertising business is valued at HKD 104.73 per share using a 27x P/E ratio [17][20].

Investment Rating - The report maintains a neutral investment rating for Tencent Holdings, indicating a cautious outlook on the stock's performance in the near term [2]. Core Insights - The report highlights that Tencent's stock has experienced a decline of approximately 9% following its inclusion in the U.S. Department of Defense's Chinese Military Companies List, marking a significant drop compared to the Hang Seng Index and Hang Seng Tech Index [5][6]. - Despite geopolitical risks, the report suggests that the impact on Tencent's business may be minimal, although market sentiment could be affected [6]. - Tencent's current price of approximately HKD 370 per share reflects a dynamic PE ratio of about 14 times, nearing the lower end of its historical valuation range [8][11]. - The report emphasizes Tencent's ongoing investments in AI, cybersecurity, cloud computing, and AR/VR, which are expected to drive future growth [6]. Summary by Sections Recent Events - On January 6, 2025, Tencent was listed on the CMC list, which led to a notable stock price drop [4]. - On January 8, 2025, WeChat was removed from the "Notorious Markets" list, indicating potential flexibility in U.S. regulatory actions [4]. Financial Performance - Tencent's revenue from value-added services reached CNY 826.95 billion in Q3 2024, a 9% year-on-year increase, with gaming revenue contributing significantly [13]. - The report notes that Tencent's international gaming revenue is approaching half of its domestic gaming revenue, indicating strong growth in overseas markets [13]. Business Developments - The report outlines Tencent's strategic focus on enhancing its WeChat ecosystem, with significant growth in GMV for WeChat Mini Programs expected in 2024 [13]. - Tencent's gaming division is undergoing restructuring to improve efficiency and address past challenges, with new game releases anticipated in 2025 [16]. Shareholder Returns - Tencent has repurchased 307 million shares in 2024, totaling HKD 112 billion, which has contributed to an increase in earnings per share [40]. - The total shareholder return for 2024 is estimated at approximately HKD 145.7 billion, reflecting a robust dividend yield [40].

Summary of Key Points Core Viewpoint - Tencent Holdings repurchased 4.01 million shares at a cost of approximately HKD 1.501 billion, with the repurchase price ranging from HKD 365.6 to HKD 379.4 per share [1]. Group 1 - The total expenditure for the share repurchase was around HKD 1.501 billion [1]. - The number of shares repurchased was 4.01 million [1]. - The price range for the repurchased shares was between HKD 365.6 and HKD 379.4 [1].

Investment Rating - Buy (Maintained) [2] Core Views - Tencent's e-commerce business is accelerating comprehensively, leveraging WeChat's social advantages and integrating private and public domain traffic [4][5][23] - WeChat's e-commerce ecosystem has seen rapid growth, with WeChat Shop GMV in 2024 being 1.92 times that of 2023, and order volume increasing by 2.25 times [4] - Tencent's organizational restructuring has elevated the e-commerce business, with WXG taking unified leadership, and the integration of video accounts, mini-programs, and public accounts [5][22] - Tencent's differentiated strategy focuses on social fission and innovative features like "gift-giving," which enhances user engagement without compromising the user experience [9][29] Financial Performance and Projections - Revenue is projected to grow from CNY 6,579 billion in 2024E to CNY 7,803 billion in 2026E, with a CAGR of 8.0% to 7.9% [18] - Net profit attributable to shareholders is expected to increase from CNY 2,247 billion in 2024E to CNY 2,803 billion in 2026E, with a CAGR of 9.1% to 14.4% [18] - Earnings per share (EPS) is forecasted to rise from CNY 24.36 in 2024E to CNY 30.38 in 2026E [18] E-commerce Business Development - Tencent's e-commerce journey has evolved from early explorations (2005-2012) to the current phase of comprehensive acceleration (2024-present) [5] - The integration of private and public domain traffic through WeChat Shop and mini-programs has been a key driver of growth [23] - Video accounts have become a significant platform for e-commerce, with daily active users surpassing Kuaishou in Q3 2022 [4] Competitive Landscape - Tencent's "gift-giving" feature is a unique social play, differentiating it from competitors like Taobao and Douyin, which have similar features but lack the same level of social integration [10][28][29] - Taobao's "gift-giving" feature, launched in January 2025, allows users to send gifts without entering a recipient's address, but still relies on external platforms like WeChat for sharing [10] - Douyin's "gift-giving" feature, primarily focused on group buying, has seen significant usage, with over CNY 1 billion in gifts sent by the end of 2024 [28] Organizational and Operational Strategies - Tencent has restructured its e-commerce business to streamline operations, with WXG leading the charge and integrating various teams like WeChat Pay and Tencent Advertising [5][22] - The company has introduced new tools and features for merchants, such as the WeChat Shop Assistant app and upgraded order entry points for users [23] - Tencent's focus on social fission and innovative marketing strategies, like the "gift-giving" feature, has been instrumental in driving user engagement and merchant participation [9][29] Market Positioning and Growth Potential - Tencent's e-commerce business is well-positioned for growth, with a strong foundation in private domain e-commerce and video accounts, now expanding to a comprehensive WeChat ecosystem [20][31] - The company's e-commerce growth is expected to enhance monetization across the WeChat ecosystem, including payment fees, in-loop advertising, and technical service fees for WeChat Shop [20] - Tencent's strong social moat, coupled with its gaming and video account businesses, continues to drive growth, with AI and e-commerce offering additional upside potential [20]

Investment Rating - The report maintains an "Outperform" rating for Tencent Holdings (00700 HK) [1] Core Views - Tencent's content and platform strengths position it well for leadership in the AI era [1][5] - Tencent Video and Tencent Literature Group demonstrate strong operational strategies and growth potential [3] - Tencent's AI and e-commerce initiatives leverage its data, social, and scenario advantages [4][6] Tencent Video - Tencent Video focuses on high-quality content with 9 S+ series launched in 2024 [3] - Membership business grows steadily with SVIP users increasing and ARPPU rising [3][11] - Innovative advertising strategies enhance ad effectiveness and broaden revenue channels [3][11] - AIGC capabilities integrated into animation production improve efficiency and quality [33] Tencent Literature Group - Tencent Literature maintains a leading position in online literature with 170k new authors and 320k new novels added in H1 2024 [12] - The "Farm-Factory-Park" IP development model drives cross-media success and global expansion [14][24] - AI translation technology supports globalization with 3 billion cumulative users on Webnovel and 6k translated works by Nov 2024 [14] AI and E-commerce - Tencent leverages its HPC and data processing capabilities to close the gap with global peers in AI [4][6] - WeChat's high daily usage (40-50 times) provides a strong foundation for AI-driven user engagement [4][6] - WeChat Shop integrates e-commerce components, enhancing data and user profiling for targeted advertising [4][25] - E-commerce ad monetization rate on WeChat is below 1%, with significant room for growth compared to competitors like Kuaishou (3%) and Douyin (6%) [17] Financial Projections - Adjusted net profit for 2024-2026 is projected at 2198/2482/2729 billion yuan, with PE valuations of 16/14/12x [20][31] - Revenue growth is expected at 9% in 2025 and 8% in 2026, with ROE improving to 20% in 2024 [22] Strategic Initiatives - Tencent's AI tools, such as "Yuanbao" and "ima," enhance user experience through multimodal capabilities and seamless integration with WeChat [25] - WeChat Shop's integration of online and offline commerce is expected to drive future growth [25]

Investment Rating - Maintains a "Buy" rating with a target price of 430 HKD [1][4] Core Views - The 2025 WeChat Open Class PRO event highlighted the potential for further monetization within the WeChat ecosystem, particularly through the integration of mini-programs, WeChat Stores, and service accounts [1] - WeChat Stores have shown rapid growth, with GMV in 2024 reaching 1.92 times that of 2023, and order volume increasing by 2.25 times [1] - WeChat mini-games continue to grow rapidly, with monthly active users (MAU) reaching 500 million and daily active users (DAU) hitting 100 million, a 10% year-over-year increase [1] - Video accounts have seen significant growth, with live streaming sessions by quality content creators increasing by 100% and their income rising by 110% in 2024 [1] - WeChat's AI capabilities, including the newly launched WeChat Cloud AI Code Assistant, are expected to lower the development threshold for mini-programs and support global and intelligent transformation for enterprises [1] WeChat Store Growth - WeChat Stores have expanded comprehensively, helping merchants transition from single-channel to omnichannel operations, thereby enhancing the operability of WeChat e-commerce and broadening user reach [1] - The integration of WeChat Stores with mini-programs and public accounts has improved multi-scene marketing efficiency, with the "gift-giving" feature expected to drive new e-commerce growth by leveraging WeChat's social attributes [1] Mini-Games Performance - Mini-games have demonstrated strong performance, with over 900 games monetizing through IAA (In-App Advertising) and contributing over 1 million in revenue, with the overall market size expected to double in the next three years [1] - IAP (In-App Purchase) mini-games have benefited from improved infrastructure, with notable performance in MMO, SLG, and tower defense genres [1] - Cross-platform mini-games have shown significant growth in PC gaming duration, payment rates, and ARPU [1] Video Accounts and AI - Video accounts have become a new showcase space for mini-games, with short video views increasing by 170% [1] - The WeChat Cloud AI Code Assistant has been applied to hundreds of Tencent applications, facilitating efficient mini-program development [1] - Enterprise WeChat has introduced intelligent tools like smart tables, aiding in the digital transformation of manufacturing and supporting global expansion [1] Financial Projections - Revenue is projected to grow from 6,536.7 billion RMB in 2024E to 7,599.2 billion RMB in 2026E, with a CAGR of 7.3% from 2024E to 2026E [3] - Non-IFRS net profit is expected to increase from 2,255.8 billion RMB in 2024E to 2,761.6 billion RMB in 2026E, with a CAGR of 10.6% over the same period [3] - The stock is currently trading at 15x, 13x, and 12x Non-IFRS PE for 2024E, 2025E, and 2026E, respectively [1][3]