CICC: Mainland online platform stocks are becoming more attractive, core recommendation includes TENCENT (00700) and others.

Zhongjin released a research report stating that recently, the overall market sentiment has turned lower, leading to a correction in the overall sector. Currently, the overall sector valuation is between the mean and 25th percentile. From a fundamental perspective, the overall sector's performance is stable, with healthy growth in key areas such as advertising and gaming. Key companies like TENCENT (00700) are still showing improved profit margins and operating leverage. Overall, the fundamentals are solid, the potential of AI is still present, but valuations are decreasing, and the sector's attractiveness is increasing. In summary, the core recommendation is TENCENT, with a suggested focus on KUAISHOU-W (01024), NetEase (09999), NEWBORNTOWN (09911), and Bilibili (09626). Furthermore, Zhongjin believes that AI is still in a high-growth stage, and compared to overseas tech giants with aggressive capital spending, domestic internet companies are more practical and sustainable in their investments, making AI a significant opportunity for future growth for some internet companies. Zhongjin stated that the majority of mainland online platform companies are forecasted to have a reasonable P/E ratio of 15 to 20 times by 2026. This means that if a company's performance exceeds expectations in the future, it could potentially benefit from both performance and valuation increases. Some companies in the sector, such as Bilibili, have long been at highly overvalued levels, while companies like BOSS ZHIPIN-W (02076), TME-SW (01698), and NETEASE MUSIC (09899) have been at moderately high valuation levels. Zhongjin believes that for companies with a positive long-term outlook and short-term performance exceeding expectations, a P/E ratio of 20 to 25 times is also reasonable. Currently, the valuations of most companies in the sector are laying a solid foundation for those companies whose performances may exceed expectations in the future.