HAITONG INT'L: Cuts TENCENT (00700) target price to HK$470, expects Q3 adjusted operating profit to fall 5% year-on-year

HAITONG INT'L released a research report stating that it slightly cut TENCENT (00700) target price by 2% to HK$470 to reflect lower EPS forecasts, maintaining an "Outperform" rating; the bank expects Tencent's Q3 revenue to be RMB210.2 billion, up 9% year-on-year, and adjusted operating profit to be RMB68.8 billion, down 5% year-on-year, mainly due to AI-related depreciation and product investments reflected in cost of revenue and operating expenses. The bank expects Tencent's 2026 revenue to be RMB823.3 billion, up 10% year-on-year, and adjusted net profit to be RMB265.5 billion, up 2% year-on-year. On the gaming business, the bank noted that domestic games remain the main foundation, with Tencent continuing to lead the market; Sensor Tower ranked "Honor of Kings" as the world's highest-grossing mobile game in July, August and September 2026, and in August five Tencent games entered the global top ten by revenue growth. However, the bank expects international games Q3 revenue to fall 6% year-on-year to RMB19.5 billion, mainly due to fewer new game launches and a high base effect, with "GTA VI" scheduled for launch in November 2026 set to intensify competition for player attention and budgets; Q3 2025 international games revenue rose 43% year-on-year, driven by Supercell titles and sales of "Dying Light: The Beast". The bank expects marketing services revenue to remain driven by Video Accounts, but growth may slow as the contribution from Miniclip in-app advertising faded in the previous quarter and the macro environment remains weak. The bank also expects payment business to remain weak as the macro situation weighs on transaction volumes; enterprise services, meanwhile, are driven by rising cloud demand and a positive pricing environment, which can partially offset the pressure. HAITONG INT'L noted that AI remains Tencent's key strategic investment focus, and short-term depreciation will continue to weigh on financial performance, but Tencent prefers disciplined deployment rather than automatically accelerating spending quarter by quarter.