Zh Tong Finance APP learned that Guosen Securities released a research report stating that it maintains the Tencent (00700) 'outperform market' rating, and expects that the company's net income after adjustment from 2024 to 2026 to be 221.8/249.9/275 billion yuan, with an upward adjustment of 10%/10%/10%. From the revenue side, the company's advertising business and financial technology business have been affected by macro factors. However, inventory release and technology upgrades in the advertising business are expected to bring advertising growth. Payment business, which is the major income in financial technology business, has been affected by macro factors, but high gross profit businesses like wealth management have shown healthy growth. In addition, the continued development of video and e-commerce has also brought revenue growth in e-commerce advertising and technology service fees. On the profit side, the continued development of high-quality businesses provides potential for sustained profit growth.

Guosen Securities' main points are as follows:

Advertising and gaming businesses have performed well, and profits have increased significantly.

In 2024Q2, Tencent realized a revenue of 161.1 billion yuan, a year-on-year increase of 8%. The main growth was contributed by advertising and gaming businesses, while financial technology business was relatively weak due to macro factors. On the profit side, the adjusted operating profit for 24Q2 was 58.4 billion yuan, a year-on-year increase of 27%. Non-IFRS net profit attributable to equity holders was 57.3 billion yuan, a year-on-year increase of 53%; Non-IFRS net margin was 35.6%, a year-on-year increase of 10pct. The significant increase in profit margin mainly comes from: 1) the development of high gross profit businesses; 2) profit release from equity joint venture companies (PDD Holdings, Kuaishou, Epic, etc.); 3) one-time deferred tax reversal.

Online game: revenue increased by 9% year-on-year, and is expected to accelerate in the second half of the year.

In 24Q2, the company's online game business revenue was 48.5 billion yuan, a year-on-year increase of 9%. 1) The revenue of local market games increased by 9% year-on-year to RMB 34.6 billion yuan, mainly due to the revenue growth of 'Fearless Agreement' and the successful release of 'DNF' mobile game. Two top grossing mobile games 'King of Glory' and 'Peace Elite' recovered their year-on-year growth in 24Q2. 2) International market game revenue increased by 9% year-on-year to RMB 13.9 billion yuan, mainly due to the resurgence of Supercell's games ('Clash Royale' and others) and strong performance of 'PUBG MOBILE'.

The company will benefit from releasing more advertising inventory.

In 24Q2, the company's online advertising revenue was 29.9 billion yuan, a year-on-year increase of 19%. 1) In terms of advertising system, the company upgraded its advertising technology platform, enabling it to analyze longer user interest cycles and process user signals more frequently. 2) The company indicates that it may benefit from releasing more advertising inventory (especially through video accounts). As domestic circulation and e-commerce develop, the company will benefit from the mixed transformation of WeChat's in-app advertising.

Financial technology and enterprise services: affected by macro disturbances.

In 24Q2, the revenue of financial technology and enterprise services business increased by 4% year-on-year to 50.4 billion yuan. 1) The number of commercial payment transactions continued to grow at a healthy pace, but the average value of each payment transaction decreased year-on-year due to slow consumer spending. 2) Wealth management services achieved double-digit year-on-year growth; 3) Revenue from consumer loan services decreased year-on-year, mainly due to the adoption of more cautious credit policies; 4) Revenue from enterprise services increased by more than ten percentage points year-on-year.