CICC: Rating Tencent (00700) as "Outperform" Target price of 468 Hong Kong dollars.

CICC released a research report stating that the target price for TENCENT (00700) is 468 Hong Kong dollars, with a rating of "outperform the industry". The bank believes that Tencent still has the potential to achieve faster profit growth than revenue growth. The main reasons are that although the group's operating leverage has narrowed, it still exists, and Tencent has realized the importance of long-term development of AI. Therefore, the bank predicts that the group's capital expenditure on AI will grow reasonably, rather than significantly increasing as the market expects. In addition, Tencent has already exceeded shareholder returns for 2024, and has recently been repurchasing 1.5 billion Hong Kong dollars per day to actively reward shareholders through buybacks. As for the gaming business, CICC predicts that Tencent's overseas gaming revenue in the fourth quarter of 2024 will increase by 13% year-on-year based on a longer game cycle revenue amortization period. Domestic games are also performing well, with an estimated 20% year-on-year increase in the fourth quarter of 2024. In terms of advertising business, due to the increase in ad loading rates compared to the second half of last year, the bank predicts that Tencent's advertising revenue growth will slow to 12% year-on-year in the fourth quarter of 2024. Considering the incremental revenue from video commerce technology services, Tencent's enterprise service revenue is expected to increase by 9% year-on-year in the period, and financial technology and enterprise services (FBS) revenue in the fourth quarter of last year is expected to increase by 2% year-on-year.