1. Forecast of main financial indicators: We expect the company to achieve revenue of 167 billion yuan (YoY +8%) in 2024Q3. Among them, value-added services are 82.3 billion yuan (YoY +9%), value-added services are 51.8 billion yuan (YoY +13%), social networking 30.5 billion yuan (YoY +3%), online advertising business 29.8 billion yuan (YoY +16%), and fintech and corporate services are 53.6 billion yuan (YoY +3%). The company is expected to have a gross profit margin of 53% (YoY+4pct) and gross profit of 89.1 billion yuan (YoY +16%); sales expenses ratio of 6%, general and administrative expenses ratio of 17%; NON-IFRS operating profit of 60.7 billion yuan, up 18% year on year; NON-IFRS net profit to mother 56.1 billion yuan, up 25% year on year; NON-IFRS operating margin 36% (YOY+3pct), NON-IFRS net profit margin 34% (YOY+5pct)

2. Gaming: Revenue is expected to increase 13% year-on-year in 2024Q3, leading games will remain stable, “DNF Mobile Games” will contribute more, Supercell's “Brawl in the Wilderness” will continue to be strong, and the “Fearless Contract” mobile game will perform well at home and abroad, and game revenue is expected to accelerate in the second half of the year.

3. Advertising business: Revenue is expected to increase 16% year-on-year in 2024Q3, video advertising continues to increase, ad loading rate increases month-on-month, and direct-run e-commerce, short drama, medical care, home appliances and other industries have performed strongly recently.

4. Fintech and corporate services: Revenue is expected to increase 3% year-on-year in 2024Q3. The payment business is under pressure, and financial management and other businesses have performed well recently; the cloud business is steady, the video e-commerce GMV continues to grow, and delivery technology service fees contribute marginally.

The profit forecast and investment rating take into account the strong growth in the company's game business flow, steady advertising, and significant year-on-year increase in profit margins. We adjusted our profit expectations. We expect the company's FY2024-2026 revenue to be 656.4/715.7/774 billion yuan, NON-IFRS net profit to mother 220.7/250.3/280.9 billion yuan, corresponding non-IFRS EPS is 24/27/30 yuan, and the corresponding non-IFRS PE is 16/ 14/13X, according to the SOTP valuation method, we gave Tencent Holdings' businesses a total target market value of 4 trillion yuan/HK$4.4 trillion in 2024, corresponding to a target price of HK$490, maintaining a “buy” rating.

Risks indicate the risk of slowing down in the growth rate of active users, risk of new game approval process, risk of video content supervision, risk of rapid increase in content costs, risk of rapid increase in channel costs, risk of competition risk, antitrust risk, risk of financial policy changes, investment risk, risk of valuation adjustments, and expansion of video accounts and WeChat games falling short of expectations.