Locking in the core value of domestic social networking, with a huge user pool and high usage time: WeChat QQ, as the leading social networking platform in China, has over 1.3 billion monthly activities, and has basically completed full coverage of China's residents, which in turn generates high-value traffic in all dimensions. With its huge user pool, the company extends many high-value Internet tracks with its huge user pool. On the one hand, the huge user pool naturally contributes a high threshold. On the other hand, as Tencent's business continues to expand in all aspects of China's residents' lives, Tencent's applications will cover every dimension of China's residents' lives and take up more time. In the future, it will be difficult for Tencent's apps to be used as China's Internet users The one that got around The service system continuously creates value, which in turn provides a solid value space for the company.
R&D capabilities are at the forefront, and games+cloud computing has contributed to a stable base market: Tencent has top game development studios such as Tianmei Photonics, accurately locates development pipelines for different types of games, and has super S-level games such as “King's Rongyao” and “PlayerUnknown's Battlegrounds” that contributed steadily throughout the quarter. At the same time, “Dawn of Dawn Awakens”, which was launched in February 2023, is expected to be another major player in Tencent's mobile games. In terms of cloud business, Tencent Cloud directly connects with many fields such as education, media, audio and video, government and enterprise services, etc. It is expected that in the future, businesses in the gaming and cloud computing fields will provide Tencent with a high value base and a solid leading barrier.
Video accounts are progressing rapidly, and when they rise to prominence, look at the increase: the total usage time of video account users in 2022 has already exceeded 80% of the total usage time of users in the circle of friends. In terms of content, the number of daily active creators and the average number of videos uploaded per day both increased by more than 100% year-on-year, and the number of original content played on the platform increased by 350%. The future monetization channels for Tencent's video account include live streaming, e-commerce, advertising, etc. Currently, development is booming, and it is expected to create a second growth curve for Tencent in the future.
Investment recommendations: We expect the company to achieve revenue of 6,239.34/6,922.68/762.68/762,739 billion yuan in 2023-2025; net profit of 1,821.60/2,035.52/ 228.023 billion yuan; EPS 19.04/21.27/23.83 billion yuan. The corresponding PE is 17.7/15.9/14.2 times, respectively. The company is a domestic leader in the social networking field, with stable core values. At the same time, relying on a massive user base to continuously expand and monetize various types of businesses, we are firmly optimistic about Tencent's long-term value, covering it for the first time, and giving it a “buy” rating.
Risk warning: Regulatory changes in gaming, finance and other industries, the degree of development of the WeChat video account ecosystem falls short of expectations, advertisers' willingness to launch falls short of expectations due to the continued downturn in the macro environment, risks of marginal changes in domestic Internet policies, etc.