Key Takeaways:
Guohai Securities kept its Buy rating on Tencent Holdings with a HK$627 target price after Q2 revenue rose 11 percent.
The broker's sum-of-the-parts valuation assigns Tencent a combined market value of RMB 5.0 trillion, or HK$5.7 trillion, for 2026, Guohai Securities said in a research report dated Aug. 19.
Guohai forecasts 2026-2028 revenue of RMB 823.3 billion, RMB 901.5 billion and RMB 982.2 billion, with Non-IFRS net profit of RMB 266.3 billion, RMB 274.3 billion and RMB 288.1 billion. That implies Non-IFRS EPS of RMB 29, RMB 30 and RMB 32, or price-to-earnings multiples of 13.0x, 12.6x and 12.0x.
Tencent reported Q2 revenue of RMB 204.8 billion, up 11 percent year on year, with marketing services climbing 22 percent to RMB 43.6 billion and cloud revenue rising more than 20 percent. Gross margin widened to 58 percent from 57 percent a year earlier, while Non-IFRS net profit rose 9 percent to RMB 68.4 billion.
The report follows Tencent's Aug. 12 earnings release, which showed gaming revenue up 11 percent to RMB 65.9 billion, with domestic titles gaining 17 percent. Value-added services, the largest segment at 48 percent of revenue, grew 8 percent to RMB 98.4 billion, and fintech and enterprise services rose 9 percent to RMB 60.3 billion. WeChat combined monthly active users reached 1.439 billion, up 2 percent.
Guohai flagged AI spending as a near-term drag on profit growth, noting that excluding new AI products, Non-IFRS operating profit rose 19 percent year on year versus 9 percent including them. Tencent's Q2 capital expenditure reached RMB 52.8 billion, up 176 percent year on year, as the company funds its Hunyuan model, WorkBuddy and CodeBuddy inference, and WeChat AI. The broker expects returns to flow through as agent products scale, with WorkBuddy recording 20.97 million monthly visits in June, the most among 17 mainstream domestic desktop office agents tracked by Analysys.
The broker's target implies upside for holders as Tencent's AI investments mature. Investors will watch whether the company's agent products, led by WorkBuddy, convert heavy computing outlays into subscription and token revenue in coming quarters.
This article is for informational purposes only and does not constitute investment advice.
