Broker: China Galaxy International Securities (Hong Kong) Co., Limited
Date of report: July 22, 2026
Excerpt from China Galaxy International report.
Report Summary
Tencent Holdings (700 HK)
- Actionable Call: ADD (Buy) – High conviction
- Target Price: HK\$702 (upside 48.1% from current HK\$474)
- Key Idea: Tencent is expected to deliver solid 2Q26F results, with revenue forecasted to rise 10.2% YoY to RMB203.3bn, mainly driven by gaming and advertising businesses. Non-GAAP net profit is projected to increase 6.4% YoY to RMB67.1bn, with a net profit margin of 33.0%.
- Highlights:
- Gaming revenue growth supported by top-performing titles (Honor of Kings, Game for Peace, Delta Force) and new pipeline launches.
- Advertising revenue expected to climb 17% YoY, leveraging new ad inventory and AI-driven eCPM improvements.
- Strong AI & Cloud momentum: Tencent’s Hy3 AI model leads global API usage; WorkBuddy AI agent dominates domestic office productivity apps.
- Significant AI-related capital expenditure planned (FY26F capex forecast: RMB103bn), with likely further increases in 2H26F.
- DCF-based target price maintained at HK\$702, supported by robust cash flow (net cash of RMB761bn expected at end-FY26F).
- Implications: Tencent’s revenue and margin growth are expected to be driven by continued AI innovation across business units over the next 3–5 years. Key catalysts for re-rating include better-than-expected revenue and margin improvement in 2Q26F. Risks include margin pressure from larger AI investments and slower macro-driven revenue growth.
Ticker: 700 HK
above is an excerpt from a report by China Galaxy International Securities. Clients of China Galaxy International Securities can be the first to access the full report from the China Galaxy International Securities website : https://www.chinastock.com.hk/
