Citi: Expects Tencent Holdings' Q2 performance to be stable, raises target price to HKD 699, maintains "Buy" rating
Citi expects Tencent Holdings' performance in Q2 2025 to be stable, with non-GAAP net profit increasing by 4.9% year-on-year to RMB 60.1 billion, and revenue and profit expected to meet or exceed market expectations. The target price has been raised from HKD 695 to HKD 699, maintaining a "Buy" rating. Tencent's online advertising revenue is expected to grow by 16.5% year-on-year, and the gaming business will support stable revenue due to new game releases and content upgrades. Tencent will announce its performance on August 13 and will highlight the latest developments in AI models and the new game pipeline
According to the Zhitong Finance APP, Citigroup has released a research report stating that after adjusting its estimates, it has revised the target price for Tencent Holdings (00700) using the Sum of the Parts (SOTP) valuation method, raising it from HKD 695 to HKD 699, corresponding to forecasted price-to-earnings ratios of 24.4 times and 22.3 times for this year and next year, respectively, while maintaining a "Buy" rating and core holding preference.
The report indicates that Tencent Holdings will announce its Q2 2025 results on August 13, with expectations for stable performance, estimating a 4.9% year-on-year increase in non-GAAP net profit to RMB 60.1 billion, with revenue and profit expected to meet or exceed both the bank's and market consensus expectations. The gaming business has potential upside due to contributions from new games and deferred revenue, although seasonal weakness partially offsets these factors. The bank expects Tencent's online advertising revenue growth to slow from 20% year-on-year in Q1 to 16.5% year-on-year, as advertising spending on e-commerce platforms is slightly diluted by food delivery subsidies, despite a strong performance during the 618 promotional season.
Citigroup anticipates that entering Q3 2025, Tencent's gaming business will support stable revenue due to strong seasonal factors, new game releases, and content upgrades, despite a high base, and expects Tencent to highlight the latest developments and updates on AI models (such as the Hunyuan 3D world model) and new features of Yuanbao, as well as the new game pipeline, WeChat search momentum, and macro outlook
