Profitability continued to improve, and adjusted net profit to mother exceeded expectations: 2024Q2 recorded revenue of 161.1 billion yuan, up 8% year on year, and net profit to mother recorded 48.4 billion yuan, up 79% year on year. After deducting items such as non-cash equity incentive expenses and investment income, Non GAAP's net profit reflecting the core business recorded 57.3 billion yuan to mother, an increase of 53% over the previous year. The 2024Q2 value-added services business revenue recorded RMB 78.8 billion, an increase of 6% over the previous year.
The game business rebounded steadily: The 2024Q2 game business recorded 13.9 billion yuan, an increase of 9% over the previous year. The growth rate of total turnover significantly exceeded the revenue growth rate. The growth was mainly driven by the strong performance of “PUBGMOBILE” and the increase in user and revenue growth brought about by the increase in popularity of Supercell games. The 2024Q2 game business in the local market recorded RMB 34.6 billion, up 2% year on year. The increase was mainly due to revenue growth brought about by “Dreadless Pact” and the successful release of “Dungeons and Warriors: Origins”. The overall domestic game turnover growth rate was also higher than the revenue growth rate. Regarding the country's supportive comments on digital content, including games, the company believes this is definitely positive for the content industry as a whole. Therefore, the company has been making a very long-term strategic investment in the content industry.
High-quality advertising business growth: The 2024Q2 online advertising business recorded revenue of 29.9 billion yuan, an increase of 19% over the previous year, mainly due to the growth in video accounts and long video business revenue, as well as seasonal growth in advertising campaigns after the Spring Festival holiday. However, as some internet companies cut their advertising budgets, mobile ad network revenue declined compared to the same period last year. The company believes that the recent upgrade to its ad tech platform is a review of data changes over the years. The main benefit is the formation of a more comprehensive user interest profile. On the other hand, the company is also watching recent developments more frequently. The main benefit is to be able to understand users' current business intentions more accurately and in a timely manner.
Jinke's corporate services revenue has slowed: 2024Q2 fintech and corporate services revenue recorded 50.4 billion yuan, a year-on-year increase of 4%; fintech revenue growth has slowed to a low single-digit percentage; commercial payment revenue growth has further slowed, reflecting a slow increase in consumer spending.
At the same time, revenue from consumer loan services declined due to enhanced risk control measures. In contrast, revenue from financial services grew by double-digit percentages. Revenue from the enterprise service business increased significantly, increasing by more than ten percentage points. This was mainly due to the increase in revenue from the cloud service business, including the progress of commercialization of enterprise WeChat and the increase in technical service fee revenue for video account merchants.
Target price HK$480, purchase rating: In a comprehensive analysis, we took into account that the profit margin improvements in the company's various businesses exceeded expectations, and that the revenue growth rate under the deferred benefits of the game business was higher than the revenue growth rate; the impressive performance of the advertising business under video channel repositioning, revenue and operating profit forecasts were calculated using 2024 forecast data to calculate the target price of HK$480, with room for an increase of 30.3% from the previous closing price, maintaining the purchase rating.