Jinwu Financial News | Huachuang Securities released a research report stating that tencent (00700) achieved revenue of 167.2 billion yuan in Q3 2024, up 8% year-on-year and 4% quarter-on-quarter, which met expectations; achieved gross profit of 88.8 billion yuan, up 16% year-on-year and 3% quarter-on-quarter, which met expectations; achieved a NON-IFRS attributable net income of 59.8 billion yuan, up 33% year-on-year and 4% quarter-on-quarter, exceeding expectations by about 10%.

The report indicates that stable growth in core products and gradual release of revenue contribute to earnings. 1) International market game business achieved revenue of 14.5 billion yuan, up 9% year-on-year, slightly below market expectations. This quarter, "PUBGM" and "Brawl Stars" continued to perform well, whereas the launch of the console version of "VALORANT" drove revenue growth of over 30% year-on-year; the revenue growth rate is still significantly higher than the income growth rate, but the improvement in retention rates for certain games has led to an extension of the revenue deferral period. The report expects that revenue will continue to be gradually released in subsequent quarters; 2) The local market game business achieved revenue of 37.3 billion yuan, up 14% year-on-year, slightly exceeding market expectations. This is primarily driven by revenue recognition from DNFM and the stable performance of leading products; 3) Recently, multiple products have started PR, with several in the pipeline such as "One Piece: Odyssey," "Honor of Kings: World," and "Under the Human. " Coupled with previous revenue release contributing to income, the outlook for growth certainty in the next two quarters is positive.

The report adjusted the company's revenue expectations for 2024-2026 to 658.6/717.9/771.3 billion yuan (original forecast was 661.1/718.9/773.3 billion yuan), up 8%/9%/7% year-on-year; adjusted the NON-IFRS attributable net income expectations to 222.3/251/276.1 billion yuan (original forecast was 218.6/244/271.1 billion yuan), up 41%/13%/10%. "The NON-IFRS EPS estimates were adjusted to 24.24/28.09/31.69 yuan (original forecasts were 23.82/27.28/31.08 yuan), up 45%/16%/13%. A target valuation level of 18x PE for the company's 2025 NON-IFRS EPS is given, corresponding to a target price of 546.60 HKD, maintaining a "recommend" rating.