GF Securities released a research report stating that it maintains a "buy" rating for Tencent (00700), expecting the company’s revenue to reach 657.9 and 713 billion yuan in 2024 and 2025, with year-on-year increases of 8.0% and 8.4%. Adjusted net income attributable to the parent company is estimated to be 221.8 and 244.4 billion yuan, with year-on-year increases of 45.0% and 10.2%. Based on 2024 revenue and performance, the reasonable value calculated using SOTP is 485.21 HKD/share. The company's advertising performance is robust, and there is significant commercialization potential for WeChat, which may expand the WeChat e-commerce layout in the future, helping to continuously enhance advertising performance. The overseas gaming growth trend is good, while domestic games continue to consolidate evergreen products.

GF Securities' main points are as follows:

The company released its performance for Q3 2024:

In Q3 2024, revenue reached 167.2 billion yuan, with year-on-year and quarter-on-quarter increases of 8% and 4%, compared to institutional consensus expectations of 167.9 billion yuan. The Non-GAAP net profit attributable to the parent company for Q3 2024 was 59.8 billion yuan, with year-on-year and quarter-on-quarter increases of 33% and 4%, compared to consensus expectations of 54.4 billion yuan.

In Q3 2024, the performance of games and advertising was steady, while the financial business was dragged down by weak consumer demand, and mini-programs continued to expand trading scenarios.

(1) In Q3 2024, game revenue reached 51.8 billion yuan, with year-on-year and quarter-on-quarter increases of 13% and 7%. Domestic games increased by 14%, driven by "Valorant", "Honor of Kings", "Peacekeeper Elite", and "Dungeon & Fighter: Origins". Overseas game revenue increased by 9%, with "PUBG Mobile" and "Brawl Stars" performing strongly.

Mobile" and "Brawl Stars" performed strongly.

(2) In Q3 2024, social network revenue was 30.9 billion yuan, with year-on-year and quarter-on-quarter increases of 4% and 2%.

(3) In Q3 2024, online advertising revenue reached 30 billion yuan, with a year-on-year and quarter-on-quarter growth of +17% and +0%. The demand from advertisers for content on video accounts, mini-programs, and search features increased, with a slight contribution from brands related to the Olympics, while advertising spending in the gaming and e-commerce industries grew year-on-year, offsetting the weakness in the real estate and csi sws food & beverage index industries.

(4) Revenues from financial and enterprise services amounted to 53.1 billion yuan, with a year-on-year increase of +2% and a quarter-on-quarter increase of +5%. Financial services revenue remained flat year-on-year, while enterprise service revenue grew driven by technology service fees from merchants. In Q3 2024, GMV from mini-programs exceeded 2 trillion yuan, with a year-on-year increase of several percentage points, benefiting from the coverage of various consumer scenarios.

Risk warning: Increasing regulatory scrutiny, stricter approval of game licenses, and risks from competition with short videos.