CICC raises Tencent's target price to HK$700, reiterates top stock pick.

Morgan Stanley raised Tencent's target price by 7.7%, from 650 Hong Kong dollars to 700 Hong Kong dollars, maintaining a "buy" rating and reiterating it as a top stock pick. Morgan Stanley stated that Tencent's core business is growing steadily, and it is optimistic about the continued growth in revenue driven by the deployment of artificial intelligence, which will bring high investment returns and alleviate concerns about profit margin pressure from its AI investments. Tencent maintains its capital expenditure guidance, with capital expenditure of 47 billion yuan in the first half of this year. Morgan Stanley expects the full-year capital expenditure to be 97 billion yuan, in line with expectations. Due to supply chain restrictions in the second quarter, capital expenditure is expected to accelerate in the second half of the year as sales resume in mainland China. Morgan Stanley expects Tencent's third-quarter revenue and adjusted operating profit under non-international financial reporting standards to increase by 12% and 14% respectively. Game revenue is expected to increase by 16%, advertising revenue is expected to increase by 20%, and financial technology and enterprise services revenue are expected to increase by 9%. Morgan Stanley raised its Tencent revenue and adjusted operating profit forecasts for this year and next year by 2%, with expected revenues of 743.5 billion and 812.8 billion yuan respectively for this year and next year, and forecasted adjusted operating profits of 275.8 billion and 311.2 billion yuan respectively.