Morgan Stanley: Tencent is the preferred stock, target price raised by 13% to HKD 630

On March 20, Jinshi Data reported that Morgan Stanley stated that Tencent Holdings (00700.HK) is expected to benefit from returns brought by investments in artificial intelligence (AI), along with sustainable advertising revenue growth, demand from enterprise (2B) clients, and monetization of consumer market (2C) client applications. They are committed to enhancing capital returns and profit margins, making it their preferred stock. They raised the target price from 555 HKD, an increase of 13.5% or 75 HKD, to 630 HKD, reaffirming the "Buy" rating. In the best-case scenario, the target price is seen at 790 HKD, while in the worst-case scenario, it is expected to be 430 HKD. Morgan Stanley anticipates that Tencent's capital expenditure this year will be around 94 billion RMB, accounting for 13% of total revenue, which is roughly in line with market expectations, primarily for GPU procurement. Additionally, it is expected that enterprise service revenue will grow by 20% year-on-year this year, and the overall revenue and operating profit growth forecast under non-IFRS is raised to 10% and 16%, respectively, with an operating profit margin expected to reach 38%, a year-on-year increase of 2 percentage points. Furthermore, the management is committed to providing returns to shareholders, including plans to spend 80 billion HKD on share buybacks and increase dividends.