Jinwu Financial News | BOCOM INTL Research Reports indicate that Tencent (00700) expects a 13% year-on-year revenue growth in Q1 2025, exceeding the bank's/Bloomberg market expectations of 4%/3%. This includes gaming +24%, social +7%, marketing +20%, and financial enterprise services +5%. Gross profit grew by 20% year-on-year, outpacing revenue growth, while adjusted Net income increased by 22%, thanks to the rise in high-margin businesses including local games, mini-games, video accounts, and search income, as well as optimized costs in payment and Cloud Computing Service.
The bank indicates that the combination of AI and Tencent's various business ecosystems will drive steady growth in advertising revenue. Content recommendations, game operations, and AI-related Cloud Computing Service will also benefit from AI technology. It is expected that total revenue may increase by 10% in Q2, with a forecasted 9.6% increase for the entire year of 2025, reaching 723.5 billion yuan (Bloomberg expectation of 722.7 billion yuan/VA 713.8 billion yuan). New games such as Delta Action and Victory Goddess (22/5) will alleviate market concerns about the high baseline for games in the second half of the year. Due to AI investments and increased capital expenditures, the difference in growth rates between the company's operation profit and revenue growth is expected to narrow, but the trend of profit growth exceeding revenue growth is expected to remain unchanged.
The bank continues to state that the current price corresponds to a 17 times PE ratio for 2025. Considering the stable performance and shareholder returns, as well as the potential of Tencent's AI ecosystem, the Target Price has been raised to 604 Hong Kong dollars based on a 20 times PE for 2025, maintaining a Buy rating.
