GF Securities Maintains "Buy" Rating on Tencent (00700), Highlights AI as New Business Core

Stock News12-19 15:02

Tencent Holdings (00700) has demonstrated solid achievements in advertising and gaming through AI technology and category expansion, according to GF Securities. The brokerage noted that the advertising business is expected to maintain resilient growth momentum, benefiting from continuous AI advancements and the adoption of systems like AIM+.

In gaming, Tencent has enriched its product development and investment framework in the shooter genre, entering a new expansion cycle that is likely to sustain steady growth in both overseas and domestic markets. By 2026, breakthroughs in AI and the globalization of cloud services could emerge as new growth drivers.

GF Securities reiterated a "Buy" rating with a target price of HK$754.73, citing the following key points:

**Tencent Cloud Gains Traction Overseas** Leveraging its domestic strengths, Tencent Cloud has made initial progress in global expansion, now covering 22 physical regions and 64 availability zones with over 3,200 global acceleration nodes. Southeast Asia is prioritized for the next 3–5 years due to stable energy and power supply, crucial for sustainable data center operations, with Thailand and Indonesia as key infrastructure hubs. The Middle East also holds significant potential.

Tencent Cloud’s differentiated advantages—rooted in vertical industry expertise (media, gaming) and experience in fintech and commercial services—help attract clients in emerging markets. Its Southeast Asia strategy focuses on: 1. Addressing needs of local industry leaders to encourage SME migration. 2. Supporting Chinese enterprises expanding abroad to foster ecosystem synergy.

**AI Integration and Talent Acquisition** Tencent has established an AI matrix spanning infrastructure, agent systems, and application layers, aligned with its social, content, and enterprise service ecosystems. Recent high-profile talent hires are expected to accelerate AI development.

**Earnings Forecast & Valuation** GF Securities maintains its earnings projections, forecasting 2025–2026 revenue at RMB752.4/RMB827.8 billion (up 14.0%/10.0% YoY) and adjusted net profit at RMB258.6/RMB295.3 billion (up 16.1%/14.2% YoY). The SOTP-derived target price stands at HK$754.73 per share.

**Risks**: Tighter regulations, stricter game licensing, and emerging technology disruptions.

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