1、运营数据：2024Q3 微信生态健康增长，小程序交易额超2 万亿元，QQ 智能终端月活跃账户数同比增长回正，腾讯视频和腾讯音乐付费会员数延续同比稳步增长趋势。Incidents:
On November 13, 2024, the company announced the 2024Q3 financial report. 2024Q3 achieved revenue of 167.2 billion yuan (yoy +8%, qoq +4%), operating profit of 53.3 billion yuan (yoy +20%, qoq +5%), net profit to mother of 53.2 billion yuan (yoy +47%, qoq +12%), non-IFRS operating profit of 61.3 billion yuan (yoy +19%, qoq +5%), Non- IFRS net profit to mother is $59.8 billion (yoy +33%, qoq +4%).
Our point of view:
1. Operating data: 2024Q3 WeChat's ecosystem is growing healthily, the applet transaction volume exceeds 2 trillion yuan, the number of monthly active accounts on QQ smart terminals picked up year-on-year, and the number of paid members of Tencent Video and Tencent Music continued to grow steadily year-on-year.
2. Overall performance: The core business maintained steady growth. The company's overall gross margin continued to rise year-on-year in 2024Q3 and remained basically flat (yoy+3.6pct, qoq-0.2pct); NON-IFRS operating profit increased 19% year-on-year, and NON-IFRS net profit grew faster than operating profit, increasing 33% to 59.8 billion yuan year-on-year, mainly driven by tax rate optimization and investment company revenue.
3. Value-added business: 2024Q3 game revenue achieved 13% year-on-year acceleration, with domestic and overseas markets growing 14%/9% respectively. The “Fearless Contract” mobile game showed strong performance. The growth rate of game traffic was significantly higher than the revenue growth rate, driving deferred revenue to record highs, which are expected to be gradually confirmed; Tencent Video released a number of popular homemade TV series and animation series, driving the number of Tencent Video paid members to 0.116 billion; the number of paid TME music members increased 16% year over year to 0.119 billion.
4. Marketing service business: The 2024Q3 marketing service business increased 17% year over year, mainly driven by video accounts, mini programs and WeChat search ads. Under pressure from the macro environment, the company's advertising business showed strong resilience. Overall, the commercial content of video accounts was restrained, and there is still plenty of room for release.
5. Fintech and corporate services: 2024Q3 revenue increased 2% year on year, payment business revenue declined year on year due to weak macroeconomics and consumption, and financial management business and asset holdings continued to grow; overall cloud business health, new model hybrid Turbo launched, training and reasoning efficiency doubled; video merchant technical service contributions continued to increase, video account stores upgraded to WeChat stores, and the e-commerce transaction ecosystem continued to improve.
6. Continue to strengthen shareholder returns to support stock prices: According to wind data, Tencent has repurchased HK$33.8 billion/48.4 billion/HK$90.6 billion respectively since 2022/2023/2024 (as of November 14). The company expects the repurchase scale to increase to over HK$100 billion during the year, compounded by cash dividends, which is expected to provide strong support for stock prices.
The profit forecast and investment rating take into account the steady growth of the company's core business and significant year-on-year increase in profit margins. We adjusted our profit expectations. The company's revenue for FY2024-2026 is 654.5/699.1/747.9 billion yuan, NON-IFRS net profit is 223.3/251.8/275 billion yuan, and the corresponding non-IFRS EPS is 24/27/30 yuan, and the corresponding non-IFRS PE is 15/14/13X, respectively. According to the SOTP valuation method, we gave Tencent Holdings' businesses a total target market value of 4.3 trillion yuan/4.7 trillion HK$4.7 trillion in 2025, corresponding to a target price of HK$519, maintaining a “buy” rating.
Risk warning
The risk of slowing the growth rate of active users, the risk of new game approval progress, the risk of video content supervision, the risk of rapidly increasing content costs, the risk of rapidly increasing channel costs, competition risk, antitrust risk, financial policy change risk, investment risk, valuation adjustment risk, and the expansion of video account advertisements and WeChat games falling short of expectations, etc.
