Essence International released a research report saying thatharrah'svideopoker, maintain the "Buy" rating of Tencent Holdings (00700), with a target price of 490harrah'svideopokerHK$.6, benefiting from high-quality revenue WeChat commercializationharrah'svideopokerWith the smooth advancement of the AI advertising model and the continuous upgrading of the AI advertising model, the company's profit margin is expected to remain high. Tencent's total revenue in Q1 2024 will increase by 6% year-on-yearharrah'svideopoker3% to 159.5 billion yuan, basically in line with market expectations. Gross profit margin increased by 7.1 percentage points year-on-year to 52.6%, and adjusted net profit increased significantly by 54.5% year-on-year to 50.3 billion yuan, exceeding market expectations.
Essence International's main views are as follows:
Game performance is deferred, Q2 growth is expected
In 2024Q1, revenue from Tencent's value-added services business fell 0.9% year-on-year to 78.6 billion yuan, of which international game revenue increased by 3% year-on-year to 13.6 billion yuan, and local game revenue fell by 2% year-on-year to 34.5 billion yuan. From the perspective of game turnover, Q1 Tencent's international market game turnover increased by 34% year-on-year, and the local game market turnover recovered to positive growth to 3%. Due to deferred revenue, Q2's game business is expected to resume positive growth. Q1 Social networks revenue fell 2% to 30.5 billion yuan, mainly due to the decline in revenue from live music and game services, which was partially offset by the increase in service fee income from paid music and long video members, live video number services and Mini games platforms.
Advertising business is the most eye-catching sector
In 2024Q1, online advertising business increased by 26% year-on-year to RMB 26.5 billion. It is the fastest growing business segment, mainly driven by the growth of WeChat video accounts, Mini programs, public accounts and Souyisou, increased user engagement and driven by AI-driven advertising technology platforms. Advertising spending increased in all major industries except the automotive industry, with significant increases in advertising spending in the games, Internet services and consumer goods industries.
Financial technology and its business services are growing steadily
In 2024Q1, Tencent's financial technology and corporate services revenue increased by 7% year-on-year to RMB 52.3 billion. Among them, the strong growth in wealth management service revenue was partially offset by the slowdown in offline consumer spending and the decrease in reflected revenue. At the same time, cloud service revenue and video number merchant technology The increase in service fees has driven corporate services to achieve a year-on-year growth of more than ten points.
Video numbers are growing rapidly, and the commercialization of WeChat ecosystem is accelerating
In 2024Q1, the total user usage market for video numbers has increased by more than 80% year-on-year. WeChat has strengthened the live streaming ecosystem of video numbers by expanding product categories and encouraging more content creators to participate in live streaming; the total user time spent of Mini programs has increased by more than 20% year-on-year. Among them, the average daily usage of non-game Mini programs achieved a double-digit percentage growth year-on-year, and the flow of Mini games increased by 30% year-on-year.
Risk warnings: The game business failed to meet expectations; investment in new business development affected performance; negative risks from Internet regulatory policies, etc.