2025年第二季度业绩：游戏和营销业务强劲；AI推动业务增长

2Q25 results: strong games and marketingbusinesses; AI drove businessgrowth Target PriceHK$705.00(Previous TPHK$660.00)Up/Downside20.3%Current PriceHK$586.00 Tencentannounced2Q25financialresults:total revenue/non-IFRS operatingincomegrew by 15%/18%YoY to RMB184.5/69.2bn,3%/4%ahead ofBloomberg consensus estimate, driven by solidgrowthacrossbusinesslines.Higher-margin games and marketingbusinessescontinued to maintain strongmomentum(+22% and 20% YoY respectively), driving quality growth and furtherGPM expansion (+3.6ppts YoY). We lift our FY25-27E non-IFRS earningsforecast by 1-4% to factor in the stronger-than-expected games & marketingrevenue growth andcontinuousexecution of quality growth strategy. We raiseour SOTP-derivedtarget price toHK$705.0(previous: HK$660.0). We arepositive on Tencent’s short-term earnings visibility,supported by its strongcompetitive moat, and long-termopportunitiesin AI. Maintain BUY.Solid games pipeline and evergreen games easeconcernson tough China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk comparison.Games revenuegrewby22% YoY to RMB59.2bn in2Q25and was5%ahead ofconsensusestimate: 1) domestic games revenueincreasedby17% YoYto RMB40.4bn in2Q25,mainly driven byDelta Forceand growth ofevergreengames.Delta Forcesurpassed 20mn averageDAUs and ranked among thetop 3 games by gross receiptsdomestically inJuly 2025. 2)International games revenuegrewby35% YoY toRMB18.8bnin2Q25,fuelled bythegrowth ofSupercell’s games &PUBG Mobile, andthelaunchofDune: Awakening. Looking into 2H25, we expect the solidperformanceofevergreengames andthelaunch of highly-anticipated titleslikeValorant Mobile(19 Aug) toalleviateconcernson the high-base effect. Ye TAO, CFAfranktao@cmbi.com.hk Joanna Ma(852) 3761 8838joannama@cmbi.com.hk Stock Data Longgrowth runway for marketing business supported by AI.Marketing servicesrevenuewas upby20% YoY to RMB35.8bn in2Q25(2% ahead of consensus),primarily thanks to AI empowerment andthedevelopmentof Weixin transaction ecosystem.ThemarketingrevenuefromVideo Accounts/Mini Programs/Weixin Search grew by c.50%/50%/60%YoYin 2Q25.Tencent expanded its AI applications in ad creation,placementand recommendation,which led to further improvement inconversions and ROIs. We are upbeat on the long runway for marketingbusiness, driven by the AI-enhanced ad conversion and the increasing adload. Source: FactSet FBS revenue growth accelerated.Fintech and Business Services (FBS)revenuegrewby10% YoY to RMB55.5bn in2Q25: 1) fintech revenuegrowthaccelerated to high-single-digit % YoY in 2Q25, thanks to therecovery ofcommercial payment volumeand growth of consumer loan andwealthmanagementservices;2) business services revenue growth alsoacceleratedto teens % YoY, mainly driven by the growth of AI cloudand e-commerce services.GPMofFBS expanded by 4.5pptsYoY and 1.9pptsQoQ to 52.1% in 2Q25 due tofavourablerevenue mix shift and improvedefficiency. GPM expansion trend continues.Non-IFRS OPM expandedby1.3pptsYoYto37.5%in2Q25. 1H25 capex grew by 102% YoY to RMB46.6bn (13%of total revenue), and the company will continue to invest in AI infra andmarketingto support its AI development.Despite AI investment andincreased depreciation, we still expect non-IFRSNPMto rise by c.1/1pptYoY inFY25/26E, thanks to theoperating leverageand AI empowerment. Source: FactSet Business forecasts updateand valuation Our SOTP-derived target price of HK$705.0 comprises, per share: 1) HK$310.5for the games business, based on an24x2025E PE, which is on par with theaverage PE for its global gaming peers. 2) HK$53.2for the SNS business, including the market cap of Tencent’s stake in itssubsidiaries, the valuation of Tencent Video (based on a3.5x 2025E PS, at a premium tothe 1.7x average PS of its peers given its content and user traffic leadership), and thevaluation of other membership services (based on a3.5x 2025E PS). 3) HK$125.8for the marketing services business, based ona22x 2025E PE, which is at apremium to the industry average (19x). This reflects Tencent’s more resilient ad revenuegrowth outlook, supported by the solid performance of Weixin Video Account and MiniProgram. 4) HK$95.6for the fintech business, based on a 4.5x 2025E PS, at a premium to the peeraverage (1.9x). This mainly reflects Tencent’s strong leadership in China’s digital paymentmarket and its potential to capture other fintech business opportunities. 5) HK$28.2for the cloud business, based on a 4.5x 2025E PS, at a discount to the industryaverage (6.2x) as Tencent’s current offerings mainly involve the lower-margin IaaSbusiness. 6) HK$83.8for strategic investments, based on the current market value of Tencent’s listedinvestments and the book value of its unlisted investments. We applya 30% holdingcompany discount to the fair value of Tencent’s equity investments. 7) HK$7.6for net cash. Our calculation of the valuation of Tencent’s strategic investments is based on the currentmark