TENCENT(00700) 国海证券·2024-05-19 13:02Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [12][15]. Core Insights - Tencent's core business shows robust growth, with profits significantly exceeding market expectations. The overall gross margin improved notably, driven by cost optimization and increased investment income, leading to an adjusted net profit margin of 32% [2][46]. - The report highlights the strong performance of the video account feature, which is entering a positive cycle in user growth, content supply, and creator ecology [44][57]. - Future profit growth is anticipated from cost reduction in existing businesses and the continued contribution of high-margin new businesses, particularly in video accounts and mini-games [57][66]. Summary by Sections 1. Operational Data - Video account total usage time grew over 80% year-on-year in Q1 2024, and Tencent Music's paid membership maintained a growth rate of over 20% for four consecutive quarters [2][18]. - The combined monthly active users (MAU) for WeChat and WeChat reached 1.359 billion, with QQ's MAU at 553 million [8][21]. 2. Overall Performance - In Q1 2024, Tencent achieved revenue of 159.5 billion RMB (up 6% YoY, up 3% QoQ), operating profit of 52.6 billion RMB (up 30% YoY, up 27% QoQ), and net profit attributable to shareholders of 41.9 billion RMB (up 62% YoY, up 55% QoQ) [7][23]. - The overall gross margin reached 52.6%, with significant improvements across all business segments [49][66]. 3. Value-Added Services - Game revenue remained flat YoY in Q1 2024, with domestic and international revenue growing by 3% and 34% respectively. The gaming business is expected to return to positive growth starting Q2 2024 [59][61]. - Tencent Video's paid membership grew by 8% YoY, reaching 116 million, while Tencent Music's paid membership increased by 20% to 114 million [59][64]. 4. Advertising Business - The advertising business grew by 26% YoY in Q1 2024, driven by the performance of WeChat video accounts, mini-programs, and AI-driven advertising technology upgrades [66][67]. - The report anticipates that video account advertising will contribute approximately 26 billion RMB in 2024, with long-term advertising potential exceeding 70 billion RMB [66][67].