According to Zhito Finance APP, Guozheng International released a research report stating that it maintains a 'buy' rating for tencent (00700), benefiting from strong performance in the gaming business and the smooth progression of WeChat's commercialization. The company's profit margin is expected to remain high. Using the SOTP valuation method, based on the estimated 2024 value-added services of 16x PE, advertising business of 20x PE, and financial enterprises and cloud computing service of 10x PS, along with a valuation coefficient of 0.9, the company is given a target price of 496.8 HKD.

The main points of Guojing International are as follows:

The data from the business matrix continues to show robust growth.

In 2024 Q3, the combined monthly active accounts of WeChat and WeChat reached 1.382 billion, an increase of 3% year-on-year. The monthly active accounts on QQ mobile terminals totaled 0.562 billion, an increase of 0.7% year-on-year. Among tencent's various businesses, the mini-program trade ecosystem is active, with a transaction volume exceeding 2 trillion yuan in 2024 Q3, a year-on-year increase of several percentage points, benefiting from better coverage and superior solutions in application scenarios such as ordering food, electric vehicle charging, and medical services.

Local game performance drives strong growth in the gaming sector.

In 2024 Q3, tencent's gaming business revenue achieved strong growth. Revenue from online games was 51.8 billion yuan, a year-on-year increase of 12.6%. Among them, local market game revenue grew by 14% year-on-year to 37.3 billion yuan, driven by games such as 'Valorant', 'Honor of Kings', and 'Peacekeeper Elite'. International market game revenue reached 14.5 billion yuan, a year-on-year increase of 9%, setting a quarterly record, primarily driven by the outstanding performance of Supercell's 'Brawl Stars' as well as 'PUBG Mobile' and 'VALORANT'.

The performance of the B-end business is generally improving.

In Q3, revenue from marketing services grew by 17% year-on-year to 29.99 billion yuan. This growth was primarily driven by strong demand from advertisers for video accounts, mini-programs, and WeChat search ads, as well as a slight contribution from brands advertising related to the Paris Olympics. Revenue from cni xiangmi lake fintech index and enterprise services totaled 53.09 billion yuan, a year-on-year increase of 2%. The increase in wealth management service revenue was due to the expansion of the user base and growth of client assets, while revenue from payment services declined due to weak consumer spending. Revenue from enterprise services increased year-on-year, attributed to growth in cloud computing service income and merchant technology service fees.

Risk warning: changes in the macroeconomic situation, the risk of new and old game products underperforming expectations, international business risks, and regulatory uncertainty risks.