Huachuang Securities released a research report stating that it maintains a "recommend" rating for TENCENT (00700), with revenue expectations for 2024-2026 projected at 658.6/717.9/771.3 billion yuan, YOY +8%/9%/7%; NON-IFRS Net income expectations are 222.3/251/276.1 billion yuan, YOY +45%/16%/13%. A target valuation level of 18x PE for NON-IFRS EPS for 2025 is set, corresponding to a Target Price of 546.6 HKD.

On December 17, WeChat's small shop gray tested the "Gift" feature. Except for jewelry and Education training categories, commodities priced below 0.01 million yuan will default to support the "Gift" feature.

Users can enter the product page of WeChat's small shop, click on "Send to Friends" to open the "Confirm Gift" page; on the "Gift" page, select friends from the WeChat contacts, and after completing the payment, the gift will be sent automatically. At the same time, the recipient will receive a "WeChat Gift" message notification similar to a "WeChat Red Envelope."

Main points from Huachuang Securities are as follows:

Analysis of the gray test "Gift" process: the feature is simple and the experience is friendly for the three parties.

The assessment experience of the team is as follows: ① Giver: entering the search scenario of commodity shelf e-commerce, completing the order in WeChat's small shop. Clicking on the "Send to Friends" below the product name can redirect to the "Confirm Gift" page. On the "Gift" page, select a friend from the WeChat contacts (currently this feature only supports sending to one friend). The giver cannot actively cancel the gift or cancel the Order within 24 hours, and cannot see the recipient's input address. Taking the product tested by this team as an example, the fastest delivery order took just over one hour from ordering to delivery.

② Recipient: Similar to the experience of "receiving a red envelope," confirm the receipt and fill in the address, which the giver cannot see. After confirming the receipt, the recipient can see that the gift is in the "Pending Shipment" status on the order page, where they can also perform operations such as "Request After-Sales Service," "Modify Address," and "Remind Shipment."

③ Merchant side: the new feature has a friendly threshold and allows merchants to decide whether to participate. The new feature does not involve complicated functional modules on the merchant's shop page, and the entire ordering process is relatively simple. According to 36KR Holdings, merchants can independently decide whether to participate in this activity. If merchants do not wish to participate, they can disable this feature on the "WeChat Small Shop - Marketing Center - Gift" page.

The 'Gift Giving' feature is an exploration of user habits and an expansion into new social scenarios.

The testing of the gift-giving function in WeChat Shops has similarities with the red envelope function that caused a stir when it launched in 2014 — both appeared before the Spring Festival, are expected to have a social viral effect, and meet a certain 'emotional value' for users. The social connections between the gift-giver and the recipient revitalize social viral gameplay and are expected to promote ordering and conversion during the holiday period. At the same time, the endorsement of social relationships is likely to bring a premium to the commodities. The 'gift-giving' feature of WeChat Shops has social attributes, and within the closed-loop ecosystem, buyers may be more tolerant of premium pricing for commodities. Sellers are entering a new sales scenario, which may lead to new packaging and logistics demands in the future, thus encouraging merchants to accelerate the establishment of WeChat Shops and invigorate the WeChat e-commerce ecosystem.

The further improvement of the WeChat e-commerce ecosystem shifts focus from operation to products and the ecosystem.

On May 28, 2024, WeChat underwent a new round of organizational changes, incorporating the WeChat Video Account live-streaming e-commerce team into the WeChat Open Platform (Mini Programs, Official Accounts, etc.) team. In light of the testing of the gift-giving feature in WeChat Shops, it is believed that the company may gradually adjust its e-commerce business strategy from focusing on 'operation' to placing more emphasis on 'ecosystem platform.' By standardizing and productizing WeChat Shops, the internal private domain ecosystem can be connected. At the same time, Industry Chain companies are expected to benefit from incremental growth — the current WeChat Shop ecosystem is still in its early stages, with entry points integrated into search, Official Accounts, video account advertisements, etc., hence the demands for advertising proxy and brand operation in the Industry Chain may benefit from the significant access of merchants.

Risk warning: macroeconomic fluctuations; product launch progress not meeting expectations; intensifying industry competition; tightening industry regulations.