CITIC Securities International: Maintains "Outperform" rating on TENCENT (00700) with target price raised to HK$557.

ICBC International released a research report stating that it maintains a "outperform" rating on TENCENT (00700), with profit revisions predicting an 8% revenue growth for Tencent in the fourth quarter of this year and in 2025, and adjusted net profit growth of 24% and 10% respectively. Due to the improvement in market sentiment and the increased visibility of Tencent's profitability, the target price has been raised by 15% from HK$485 to HK$557. The report mentioned that Tencent's profit growth in the third quarter of this year was stable due to the revenue and tax contributions from its associated companies, and it reiterated Tencent as the bank's top pick. With its games showing resilience, high advertising alpha, and structural surplus margin, Tencent's quality growth will be maintained. Therefore, the bank has raised its profit forecast for the group for the years 2024-2026 by 4%, 5%, and 6% respectively, to reflect Tencent's latest performance, the bank's high profit margin assumptions, and the group's favorable game prospects. ICBC International also predicts that Tencent's profit margin will continue to improve as its sales mix shifts towards high-profit businesses such as video accounts, mini-games, wealth management, and e-commerce services. The bank forecasts that its gross profit margin will increase by 3.2 percentage points in the fourth quarter of this year and by 1 percentage point in 2025 to 53.1% and 54.1% respectively, with adjusted operating profit growth of 21% and 15%.