TENCENT(00700) 天风证券·2024-11-19 09:07Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (00700) with a target price of 404.2 HKD [1] Core Views - Tencent's 3Q2024 revenue increased by 8% YoY, with Non-IFRS operating profit up 19% YoY, showing a multiplier effect where profit growth outpaces revenue growth [1] - Non-IFRS net profit attributable to shareholders rose 33% YoY, exceeding Bloomberg estimates by 10% [1] - The company's gross margin improved by 3.6 percentage points YoY, while operating expenses increased by 12% YoY, slightly above expectations but still at a relatively low rate [1] Business Segments Online Games - Online game revenue grew 13% YoY in 3Q2024, driven by domestic titles such as "Valorant," "Honor of Kings," "Peacekeeper Elite," and "Dungeon & Fighter: Origin" [1] - Domestic game revenue increased 14% YoY, slightly above expectations, while overseas game revenue grew 9% YoY (11% on a constant currency basis), slightly below expectations [1] - The company expects game revenue growth to accelerate further in 4Q2024, with a focus on the integration of "Dungeon & Fighter: Origin" and a major content update planned for the Chinese New Year [1] Advertising Services - Advertising revenue increased 17% YoY in 3Q2024, in line with expectations, driven by growth in gaming and e-commerce ad spending [1] - Video ad revenue grew over 60% YoY, with ad load rates still significantly lower than peers, indicating room for further inventory expansion [1] - Search ad revenue grew over 100% YoY, benefiting from improved search relevance through LLM capabilities [1] Fintech and Business Services (FBS) - FBS revenue grew 2% YoY in 3Q2024, in line with expectations but slightly below Bloomberg estimates [1] - Payment TPV growth rebounded in October, with GPU-related cloud revenue now accounting for a double-digit percentage of IaaS cloud revenue, indicating growing contributions from AI-driven computing demand [1] Investment Recommendation - The report raises the forecast for Non-IFRS net profit attributable to shareholders for 2024-2026 to 2281/2649/2940 billion yuan (previously 2178/2517/2786 billion yuan), representing YoY growth of 45%/16%/11% [1] - As of 2024/11/17, Tencent's stock price corresponds to 2024/2025/2026 forecast P/E ratios of 15x/12x/11x, with the 12-month Bloomberg forward P/E below the 5-year median by 1.1 standard deviations, indicating relatively low valuation [1] - The report expects accelerated game growth, improved advertising and financial services performance, and potential share buybacks to support valuation recovery, maintaining a "Buy" rating [1]