The advertising and game business performed well, and profits increased steadily. With 2024Q3, Tencent achieved revenue of 167.1 billion yuan, up 8.1% year over year. The main growth was contributed by the advertising and gaming business, and the fintech business was weak at the macro level. Adjusted operating profit for 24Q3 was 61.274 billion yuan, up 19% year over year. Non-IFRS net profit was 59.8 billion yuan, up 33% year on year; non-IFRS net profit margin was 35.8%, up 7 pcts year over year. Interest rate increases are mainly due to: 1) high-margin business development; 2) profit release for joint ventures and joint ventures (Pinduoduo, Kuaishou, Epic, etc.); 3) one-time deferred tax rate transfer.

We believe that Tencent's overall profit release is still flexible, and as WeChat traffic is revitalized, more high-margin business potential will be unleashed. The applet gradually improves infrastructure and establishes a standardized, indexed, and quality-assured trading environment within WeChat. As infrastructure construction is completed, more traffic/commercial monetization capacity will be released. In 24Q3, the GMV of transactions facilitated by the applet exceeded 2 trillion yuan. In the future, it will help advertising and payment businesses.

Online games: Revenue +13% YoY, focus on Evergreen Gaming. 2024Q3, the company's online game business revenue was 51.8 billion yuan, up 13% year on year. Deferred revenue (current liabilities) was $106.6 billion, up 20% year over year. 1) Domestic: “Fearless Pact” revenue grew well, while “Wang Zhe Rongyao” and “Peace Elite” increased year-on-year. The “DNF” mobile game performed well in 24Q3. According to Nexon's earnings report, the fourth quarter was weak, but it is expected that Q1DNF will have more activity next year to drive turnover growth. 2) Game revenue in the international market increased 9% year over year to RMB 14.5 billion. PUBG MOBILE's revenue increased by double digits year-on-year to a record high. The growth rate of game revenue in the international market lagged significantly behind the overall turnover growth rate. Due to the increase in the retention rate of some games, the revenue deferral cycle was extended accordingly.

Marketing services: Companies will benefit from freeing up more ad inventory. 2024Q3, the company's online advertising revenue was 30 billion yuan, a year-on-year increase of 17%. The growth was mainly due to the improvement of WeChat's internal transaction capacity, technological upgrades, and the contribution of the Paris Olympics to brand advertising. 1) Revenue from video marketing services increased by more than 60% year-on-year, strengthening WeChat's trading capabilities; 2) WeChat search uses large models to promote understanding of complex queries and content, and improve the relevance of search results.

Fintech and corporate services: In 24Q3, revenue from the fintech and corporate services business increased 2% year-on-year to $53.1 billion. The decline in payment income was offset by an increase in revenue from wealth management services.

Investment advice: The continuous development of the company's high-quality business provides the potential for a continuous increase in profits. We maintain our profit forecast. We expect the company's adjusted net profit for 24-26 to be 219.8/248.2/272.9 billion yuan, continuing to maintain the “superior to market” rating.