We expect Tencent 24 Q2 to achieve revenue of 161.8 billion yuan (yoy +8.5%), including game business revenue of 48.8 billion yuan (yoy +9.7%), social networking business revenue of 30.5 billion yuan (yoy +2.5%), advertising revenue of 30.5 billion yuan (yoy +22%), and fintech and corporate services revenue of 52 billion yuan (yoy +7%). The estimated sales expenses ratio is 5%, and the general and administrative expenses ratio is 15.8%; non-IFRS net profit is $50.2 billion, up 33.6% year over year, and the non-IFRS net interest rate is 31%.
The game business is expected to have a good momentum, achieving revenue of 48.8 billion yuan, an increase of 9.7% over the previous year. Among them: Domestic games are expected to achieve revenue of 34.3 billion yuan, an increase of 8% over the previous year. The game stock is steady, and the performance of the new game “DNF Mobile Game” exceeded expectations after its launch. After the official public beta on May 21, it immediately topped both the domestic iPhone list and the mobile game bestseller list. We expect the first month's turnover to be around 5 billion yuan. At the same time, it ranked first in the global mobile game bestseller list in June, with “Wang Zhe Rongyao”, “Peace Elite”, and “Battle of the Golden Shovel” ranked 234. Overseas games are expected to achieve revenue of 14.5 billion yuan, an increase of 14% over the previous year.
SuperCEII's “Brawl in the Wild” has been revitalized through innovation and other methods, and DAU and streaming have achieved rapid growth. “Burst Squad”, which was launched on May 29, has successively reached the top of the free lists in 95 countries and regions, ranking in the top 10 bestsellers in more than 60 countries and regions. The first week's revenue is expected to be around 9.1 million dollars, which is expected to contribute to the increase in performance in 24H2. Among the follow-up products, the open world racing mobile game “Need for Speed: Assembly” was launched on 7/11, and the SLG game “World Qiyuan” was launched on 7/16. It is expected that Wang Zhe Rongyao IP's new game “Dawn of the Stars” and the synthetic costume mobile game “Manor Merge” will continue to be launched during the summer vacation. Game revenue is expected to accelerate in the second half of the year.
The advertising business is expected to achieve revenue of 30.5 billion yuan, an increase of 22% over the previous year. Recent major WeChat advertising updates have expanded the customer acquisition channel for live video channels to Tencent's global traffic, helping to improve the customer acquisition efficiency of video e-commerce advertisers. Mini program ads benefit from the advertising of mini-games and skit dramas, and have also maintained strong growth.
We believe that there is still plenty of room for growth in the total user time of video accounts and ad views, which is expected to continue to drive steady growth in the advertising business. Furthermore, with the integration of the WeChat video live e-commerce team into the WeChat open platform, we believe it will help the WeChat video live e-commerce business to better integrate into the WeChat ecosystem, so that the live video e-commerce can achieve more favorable development. With the gradual improvement of the e-commerce infrastructure of video channels and the development of user habits, the future GMV and monetization revenue (internal circulation advertising+technical service fees) of this business have a lot of room for growth.
Fintech and corporate services are expected to achieve revenue of 52 billion yuan, an increase of 7% over the previous year. The growth rate of payment revenue has slowed due to weak offline consumption, but the growth of the corporate service business has maintained a relatively rapid growth rate. The hybrid model has been upgraded, and the Yuanbao app has been officially launched. AI is expected to bring continuous competitiveness to the company's long-term development.
Investment advice: Considering the strong growth of the company's game business, the advertising growth rate continues to exceed expectations, and profit margins have increased significantly, we raised our profit expectations. We expect the company's FY2024-2026 revenue to be 671/733.3/795.7 billion yuan, up 10.2%/9.3%/8.5% year on year, and net profit attributable to non-IFRS is 218/248.8/272.9 billion yuan, respectively, up 38.3%/14.1%/9.7% year on year, corresponding to non-IFRS caliber The lower PE was 15/13/12x, respectively, maintaining the “buy” rating.
Risk factors: Short-video platforms are being squeezed; the launch effect of game products falls short of expectations; stricter regulation of the platform economy, etc.