CMSC maintains a "hold" rating for TENCENT (00700) with a target price raised to 500 Hong Kong dollars.

CMSC released a research report stating that TENCENT (00700) third-quarter earnings exceeded expectations, benefiting from the recovery in gaming and advertising growth, with all business lines showing improved profit margins. During the period, the advertising business maintained steady growth, with strong growth in advertising products such as Video Number, Mini Programs, and Search. As a result, the group's target price has been raised from HK$474 to HK$500, maintaining a "buy" rating, and slightly increasing non-IFRS net profit forecasts for 2024 to 2026 by 1% to 2%. CMSC believes that Tencent's solid base of evergreen games and rich pipeline of new games give confidence in the incremental contribution from Dungeon & Fighter mobile game in the fourth quarter and the first half of next year, while also anticipating the release of more blockbuster games such as "Honor of Kings: World", "Fearless Contract" in the domestic market, and "One Piece" game. Overall, it is expected that Tencent's gaming business revenue in the fourth quarter and next year will increase by 16% and 9% respectively. As for advertising, it is forecasted that advertising revenue in the fourth quarter and next year will increase by 18% and 17% respectively, with optimism about the group's ample advertising inventory, increased ad loading rates, and unique and large user ecosystem.