CMSC International: Raises target price of TENCENT (00700) to HKD 766, maintains "buy" rating.

CMSC International released a research report stating that it has raised the target price of TENCENT (00700) from 700 Hong Kong dollars to 766 Hong Kong dollars, an increase of 9%, while maintaining a "buy" investment rating. The firm has also raised profit forecasts for Tencent, with expected revenue growth of 14% / 10% year-on-year for the fiscal year 2025/26, and non-IFRS net profit growth of 17%/15%, mainly driven by continued cost control and AI-driven efficiency improvements leading to an expansion of profit margins. The firm points out that Tencent's forecast P/E ratio for the fiscal year 2025/26 is 21 times / 19 times (higher than the average +1 standard deviation), compared to 17 times / 15 times for Chinese peers and 28 times / 28 times for American peers. Leveraging its strong social network moat and AI technology, the firm believes that AI intelligent entities, advertising, AI product commercialization, overseas opportunities, and AI-driven margin improvement will bring profit and valuation upside for Tencent. Key risks: 1) macro/consumption; 2) regulatory; 3) competition; 4) product pipeline.