Performance summary: Tencent achieved revenue of 159.5 billion yuan in the first quarter of 2024, an increase of 6% year on year; achieved non-IFRS net profit of 50.3 billion yuan, an increase of 54% year on year.
The company's revenue continued to grow in the first quarter of 2024, and profits grew rapidly. 1) On the revenue side, revenue for the first quarter of 2024 was 159.5 billion yuan, an increase of 6% over the previous year. 2) On the profit side, non-IFRS net profit for the first quarter of 2024 was $50.3 billion, an increase of 54% over the previous year. The company's revenue structure continues to be optimized, and the high-margin business is growing rapidly, boosting the company's profitability.
Value-added services have been steadily improving efficiency, and many games have performed well. Q1 value-added service revenue was 78.6 billion yuan, down 1% year on year. Game revenue in the local market was 34.5 billion yuan, down 2% year on year, and total turnover increased 3% year on year. The volume of flagship games such as “Wang Zhe Rongyao” and “Peace Elite” grew steadily. Various games optimized the commercial pace and content design, and the volume reached a record high. Game revenue in the international market was 13.6 billion yuan, up 3% year on year, and total turnover increased 34% year on year. The game developed by Supercell performed well. Q1 Gaming traffic achieved year-on-year growth under a high base, laying the foundation for game revenue to resume growth in the next few quarters.
The online advertising business is booming, and AI is empowering the improvement of advertising efficiency and accuracy. Q1 advertising revenue was 26.5 billion yuan, an increase of 26% over the previous year. WeChat video accounts, applets, public accounts, and search showed strong performance, and AI driven the improvement of advertising technology.
Fintech is growing steadily, and corporate services continue to expand. Q1 FBS revenue was $52.3 billion, up 7% year on year. Revenue from fintech services continued to grow, and revenue from financial services grew strongly; revenue from corporate services achieved double-digit year-on-year growth, and revenue from cloud services and technical service fees for video account merchants increased.
The WeChat ecosystem continues to increase in activity. Q1 WeChat and WeChat MAU 1.359 billion, up 3% year over year.
The total usage time of video account users, the total usage time of applets, and the average number of daily users of non-game applets have all achieved rapid growth. Among them, the total usage time of applet users increased by more than 20% year on year, and the number of mini game users increased by 30% year on year.
Profit forecasting and investment advice. The company's 2024-2026 non-IFRS net profit is estimated to be 214.26 billion yuan, 238.27 billion yuan, and 262.11 billion yuan, respectively, with corresponding EPS of 22.75 yuan, 25.30 yuan, and 27.83 yuan respectively. Tencent continues to focus on its core business, improving its revenue structure and steadily improving its operating efficiency. With the launch of a number of major new games, the attractiveness of advertising platforms, the expansion of non-payment businesses, and the strengthening of corporate service capabilities, the number of orders for the company's various businesses is expected to continue to grow. The company's order volume is expected to continue to grow in 2024, giving the company 20 times PE in 2024. The exchange rate of RMB to HKD was 1.08 on May 17, 2024, corresponding to the target price of HK$491.4, maintaining a “buy” rating.
Risk warning: Risks such as new travel performance falling short of expectations, R&D projects falling short of expectations, and AI commercialization falling short of expectations.