CICC: Online platform sector does not need to be too pessimistic, recommend TENCENT (00700)

Zhongjin released a research report stating that the online platform sector has been relatively weak this year, the consumption attribute track is facing short-term pressure, and the market narrative of AI is further focusing on hardware and models. The sector's valuation has fallen below the historical 25th percentile. In the context of low valuation, the bank believes that there is no need to be overly pessimistic and recommends selecting stocks with bright fundamentals from the bottom up. The bank recommends TENCENT (00700), believing that it is a company with a low long-term failure rate and high success rate in the AI era. Currently, Tencent's valuation is close to the bottom of the past five years. The resilience of its core businesses such as games and advertising is outstanding, and there are signs of accelerated AI layout, with products like WeChat Agent expected to continue advancing, potentially driving a revaluation of its valuation. The report also suggests paying attention to KUAISHOU-W (01024), NEWBORNTOWN (09911), JOYY, Inc. Sponsored ADR Class A (JOYY.US), NTES-S (09999), and BOSS ZHIPIN-W (02076). The report points out that the first-quarter revenue and profit of most online platforms met or exceeded expectations. Netease Inc Sponsored ADR's performance outperformed expectations, and considering the resilience of games and the optimization of gross profit margin, the bank previously raised its earnings forecast for Netease Inc Sponsored ADR in 2026. It maintains the forecast for most other companies, with the exception of Tencent and Kuaishou, where most companies' AI investments in 2026 can be offset by operational optimization, resulting in weaker profit impacts. In addition, the scale of shareholder returns for most companies is maintained or accelerated year-on-year. Tencent's first-quarter capital expenditure reached 31.9 billion RMB, an increase of 16% year-on-year, with 8.8 billion RMB invested in new AI products. It is expected that the full-year capital expenditure will increase significantly year-on-year, but the impact on profits in 2026 is expected to be limited. Since the beginning of the first quarter, there have been breakthroughs in intensive iteration of models such as Hydra3preview and DeepSeek-V4, with Kawaii 3.0 and Seedance 2.0 entering the top tier of global multimodal large models. Recently, WeChat Agent has launched eco-development, covering high-frequency consumption scenarios. The bank believes that it has the advantage of ecological and user scale, but ToC Agent still lacks mature demand positioning and may need a longer testing period. B-end Tencent Cloud, Button, etc. have released full-stack Agent native tools to accelerate the deployment of enterprise-level Agents.