The Wechat ecosystem continues to improve, and there is still plenty of room for realization and release.

After attending the 2022 Wechat Open course Pro Conference on January 6, we believe that the Wechat ecosystem is continuing to improve, including (1) making the video number into the most atomized content component, which can be better integrated with official accounts, WeCom and other Wechat components, which will help the video number to flow more naturally in Wechat as a video, live broadcast and other content carrier. And will focus on supporting pan-knowledge, pan-life, pan-information users like, valuable content (2) WeChat Pay is committed to the digital operation of businessmen. in the next three years, he will invest more than 10 billion to support small and micro stores to carry out digital upgrading, and will make continuous efforts to reduce transaction frictions. including the launch of WeChat Pay points, cooperation to launch "pay first" and other services, to be responsible and good tools For example, strive to reduce the large amount of funds cheated by WeChat Pay users by 90% in 2021, cooperate with the government or brand "city beautician" love meal activities, and so on. (3) Mini Program continues to enrich the commercial ecology, and more brands will combine their stores with Mini Program, which will help businesses increase the repurchase rate and reduce marketing costs. This year, we will continue to make efforts in the use of experience, support from service providers, business tools and social responsibility. (4) search the content and services related to the search terms of all users in Wechat, and fail to continuously understand and explore the unique and high-quality content and services within the ecology of Wechat, such as supporting official registration in public hospitals. (5) WeCom will continue to deepen the interworking ability with Wechat, which will make it more convenient to connect the enterprise to the outside, in order to find customer needs, efficiently carry out upstream and downstream coordination, and assist social services. The above Wechat ecosystem's main products are still in the stage of constantly developing service scenarios and capabilities, and short-term realization is still relatively restrained. It is expected that with the gradual improvement of the ecosystem, gradually enhanced realization can be achieved.

Recently, some investment companies have taken the initiative to reduce their holdings. Some investment value companies announced last month that they would reduce their holdings of strategic investment company JD.com Group (9618 HK) to about 2.3% through dividends, but the two sides will still maintain mutually beneficial business relations, including strategic cooperation agreements. Subsequently, the company recently reduced its stake in Sea Limited (SE US) from 21.3 per cent to 18.7 per cent, reducing its voting rights in Sea to less than 10 per cent, but will not further sell its shares in Sea in the next six months, meaning the company will still hold the vast majority of its stake in Sea. Based on the changes in the policy environment such as antitrust, we believe that the above active reduction will help to improve the market competition environment, and the proceeds from the Sea reduction will be used to support other investment and social responsibility projects, indicating its positive attitude towards the change of the policy environment. The reduction of its voting rights in Sea can once again clarify its investment strategy of giving sufficient decision-making power and discourse power to the invested enterprises, and have the opportunity to help reduce potential policy risks. Are in line with the interests of shareholders. We do not rule out the possibility that companies will take the initiative to reduce their holdings in other investment companies in the future, and believe that some investment companies with opportune holdings will release part of the investment value, which is expected to arouse investors' attention to the value of their invested companies and help the market to gradually reevaluate them.

Maintain the target price of HK $560.00, upgrade to the "buy" rating and maintain the profit forecast. The EPS of non-international financial reporting standards for 21-22-23 is 14.15, 16.65, 18.17 respectively. The company's financial technology and corporate service business has maintained rapid growth, and although the game and online advertising business has been affected by regulatory changes in the short term, new games have been launched one after another, sufficient game reserves and a constantly improving ecosystem can support the gradual release of cash. It is expected that the marginal impact of Internet policy tightening will be reduced this year, and the market will gradually take into account the value of some of the investment companies held by the company, and the recent buyback will also help the valuation recover. We maintain our target price of HK $560.00, corresponding to 28 times 22e PE. Due to the recent correction in share prices, the potential increase expanded to 28.1%, upgraded to the "buy" rating.

Risk tips: (1) new games and overseas expansion are not as expected; (2) economic growth is slowing down; (3) policy risks