TENCENT(00700) 华泰证券·2024-11-14 09:45Investment Rating - The investment rating for Tencent Holdings is maintained at "Buy" with a target price of HKD 505.43 [3][6]. Core Insights - Tencent's Q3 revenue grew by 8.1% year-on-year to RMB 167.2 billion, aligning with consensus expectations. The adjusted net profit increased by 33.2% year-on-year to RMB 59.8 billion, exceeding expectations by 11.4% due to improved investment income and tax rate [2][4]. - The company anticipates accelerated growth in gaming revenue for Q4, with the upcoming launch of the mobile game "DnF" during the Spring Festival in 2025 expected to act as a catalyst [2][4]. - Despite short-term macroeconomic factors potentially impacting Q4 advertising revenue, the growth of the video account feature is expected to help expand Tencent's market share [2][5]. Summary by Sections Financial Performance - Q3 value-added services revenue increased by 9.2% year-on-year to RMB 82.7 billion, surpassing market expectations. Online advertising revenue grew by 16.6% year-on-year, while fintech revenue saw a modest increase of 2.0% [4][5]. - The gross profit margin for value-added services, online advertising, and fintech improved by 1.9, 0.7, and 6.8 percentage points respectively [2][4]. Advertising Business - The advertising business is expected to face pressure in Q4 due to weak consumer spending, but the video account feature is anticipated to mitigate some of the negative impacts [5]. - Q3 advertising revenue grew by 16.6% year-on-year, exceeding consensus expectations, with a gross margin increase of 0.7 percentage points [5]. Profit Forecast and Valuation - Revenue forecasts for 2024-2026 have been adjusted downwards by 0.4%, 0.9%, and 0.9% respectively, primarily due to macroeconomic factors affecting advertising and payment revenue growth [6][22]. - Adjusted net profit estimates for 2024, 2025, and 2026 are revised to RMB 221.8 billion, RMB 250.8 billion, and RMB 285.9 billion, reflecting improvements in tax rates and strong performance in investment business [6][22]. Gaming Performance - Q3 gaming revenue continued to accelerate, with strong performances in both domestic and overseas markets. Upcoming game launches are expected to act as catalysts for future growth [4][14]. - The mobile game "Pokémon Unite" launched in November is anticipated to leverage Tencent's long-term operational capabilities in mobile gaming [17][18].