Smartkarma learned from a report released by Cinda Securities that Tencent Holdings (00700) was rated as a "buy" due to expected stabilization of the company's gaming business, better-than-expected growth in advertising, significant year-over-year increases in gross margin and adjusted net profit margin. The report predicted that the company's revenue for FY2024-2026 will be 6666/7247/7790 billion yuan respectively, with a non-IFRS attributable net profit to the parent company of 2080/2443/2697 billion yuan. The company achieved revenue of 159.5 billion yuan, gross profit of 83.9 billion yuan, operating profit of 52.6 billion yuan, and net income attributable to the parent company of 41.9 billion yuan and Non-IFRS net income of 50.3 billion yuan in Q1 2024.

The bank believes that although the revenue growth rate of Tencent's gaming business slowed down in the quarter, the performance of the billing was better than the revenue; as new games are successively launched, it is expected that the revenue growth rate of subsequent games will bottom out and rebound, and the development of small game business is also worth looking forward to. Video advertisement driven by Video Number brought substantial growth in overall income and gross margin for advertisement in 24Q1, and it is expected that the video number will continue to drive steady growth of advertisement business in the future. The financial and cloud businesses maintained healthy year-over-year growth, and the overall gross margin reached a new high. In terms of cost and expense, the company's cost reduction and efficiency improvement was significant, the expense ratio was well-controlled, and the year-over-year growth rate of adjusted net profit was significantly higher than that of revenue. Tencent's profitability still has the potential for further release in the future.