20260713-招银国际-腾讯控股-00700.HK-Solid_core_business_growth_investing_to_accelerate_AI_development_7页_762kb

Tencent (700 HK) Summary

Core Business Growth and AI Investment

Tencent is expected to report its 2Q26E results on 12 August. The company is projected to achieve 9% YoY revenue growth to RMB201.3bn, driven by games and marketing business growth. Specifically, games revenue is forecasted to grow by 9% YoY to RMB64.8bn, with domestic games up by 11% and international games by 6%. The marketing services revenue is expected to increase by 18% YoY to RMB42.2bn, attributed to increased ad inventory and AI empowerment. Fintech and business services (FBS) revenue is projected to rise by 9% YoY to RMB60.7bn, primarily due to accelerated cloud revenue growth and strong demand for AI compute.

The non-IFRS net income is estimated to grow by 7% YoY to RMB67.3bn, although the non-IFRS net profit margin (NPM) is expected to decline by 0.7ppts YoY due to AI-related investments. The company has slightly trimmed its FY26 non-IFRS net income forecast by 1% in light of these investments, but remains positive on the ROI of its AI spending, which has been proven to enhance HY model performance, accelerate cloud revenue growth, and improve ad solutions.

AI Progress and Catalysts

Tencent's AI agentic platform WorkBuddy maintains its leadership in China's productivity AI agent market with a strong DAU in 2Q26. The official HY3 model, launched on 6 July, shows significant improvements in reasoning and agentic capabilities compared to the HY3 preview, due to enhanced dataset quality and scaled reinforcement learning.

In the second half of 2026, several catalysts are expected to support Tencent's fundamental and valuation recovery:

1. Launch of Weixin AI agent "Xiaowei" and WorkBuddy iteration, enabling the company to tap into the AI agent market.
2. Upgrade of HY model with larger parameters, more quality datasets, and higher-value use cases.
3. Acceleration in cloud revenue growth, supported by increased AI compute power.

Valuation and Target Price

The SOTP-derived target price for Tencent is HK$735.00, a reduction from the previous estimate of HK$750.00. The company's current valuation at 13x FY26E non-IFRS PE is considered attractive in terms of risk-reward, with multiple catalysts ahead.

Breakdown of SOTP Valuation

• Games business: HK$345.7, based on 24x 2026E PE, which is higher than the average PE of global gaming peers (17x).
• SNS business: HK$30.6, including Tencent Video valued at 3.5x 2026E PS, higher than the average PS of peers (1.1x).
• Marketing services business: HK$144.4, based on 22x 2026E PE, higher than the industry average (17x).
• Fintech business: HK$105.6, based on 4.5x 2026E PS, higher than the peer average (1.5x).
• Cloud business: HK$35.4, based on 4.5x 2026E PS, lower than the industry average (5.2x) due to focus on lower-margin IaaS.
• Strategic investments: HK$71.1, based on current market value and book value of investments, with a 30% holding company discount.
• Net cash: HK$2.2.

Financial Summary

Revenue Forecast

Adjusted Net Profit Forecast

EPS Forecast

P/E Forecast

Key Financial Metrics

Gross Margin

Operating Margin

Adjusted Net Margin

Net Debt to Equity

Current Ratio

Analyst Ratings

• BUY: Stock with potential return of over 15% over the next 12 months.
• HOLD: Stock with potential return of +15% to -10% over the next 12 months.
• SELL: Stock with potential loss of over 10% over the next 12 months.
• NOT RATED: Stock not rated by CMBIGM.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Stock Data

Shareholding Structure

Share Performance

Analyst Certification

The research analyst certifies that:

1. All views expressed accurately reflect his or her personal views about the subject securities or issuer.
2. No part of his or her compensation was, is, or will be related to the specific views expressed in this report.
3. Neither the analyst nor his/her associates have dealt in or traded in the stock(s) covered in this report within 30 calendar days prior to the report's issue date.
4. The analyst and his/her associates will not deal in or trade in the stock(s) covered in this report 3 business days after the report's issue date.
5. The analyst and his/her associates do not serve as officers of any of the Hong Kong listed companies covered in this report.
6. The analyst and his/her associates have no financial interests in the Hong Kong listed companies covered in this report.

CMB International Global Markets Limited

• Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong
• Tel: (852) 3900 0888
• Fax: (852) 3900 0800
• Ownership: A wholly owned subsidiary of CMB International Capital Corporation Limited, which is a wholly owned subsidiary of China Merchants Bank.

Important Disclosures

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