JP Morgan reiterates Overweight on Tencent Holdings (00700.HK) and keeps its
HKD690 target. The bank says Tencent’s durable user engagement, improving game
and advertising monetisation, strong margins and balance sheet, and AI
monetisation optionality make it the highest-quality compounding growth play in
China’s internet sector. JP Morgan expects AI-related depreciation to begin in
H2, and has cut its FY26 Non-IFRS EPS forecast by 5% to 28.47 yuan while raising
FY26 capex to 200 bln yuan; the firm stresses these changes reflect heavier AI
investment and depreciation, not a deterioration in core operations. JP Morgan
projects Q2 revenue up about 9% YoY, with value-added services +5–6%, games
+9–10%, advertising +18–19% and fintech ~+5%, broadly in line with market
expectations.
