Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Chinese equities market** and the flow of funds in **China/HK** equities, highlighting trends in both passive and active fund management strategies [1][10]. Core Insights and Arguments - **Equity Inflows**: Chinese equities experienced inflows of **US$2.7 billion** in July 2025, primarily driven by **US$3.9 billion** from passive funds, while active funds faced outflows of **US$1.2 billion** [1][10]. - **Southbound Flows**: Southbound stock connect inflows reached **US$17 billion** in July, totaling **US$110 billion** year-to-date (YTD), surpassing the full-year level of **US$103 billion** in 2024 [1][10]. - **Fund Underweights**: Global and Asia ex-Japan (AxJ) funds slightly reduced their underweights in China by **1.4 percentage points** and **0.3 percentage points**, respectively, while emerging market (EM) funds increased their underweight to **3.2 percentage points** [1][10]. - **Sector Performance**: Active fund managers increased their positions in **Media & Entertainment**, **Pharmaceuticals**, and **Insurance**, while reducing exposure in **Consumer Services** and **Consumer Durables & Apparel** [10]. - **Company-Specific Changes**: Notable increases in holdings were observed for **Tencent**, **Netease**, **Jiangsu Hengrui**, and **Wuxi AppTec**, while **Meituan** and **Xiaomi** saw reductions in their positions [10]. Additional Important Insights - **Domestic Fund Outflows**: Chinese domestic passive funds targeting A-shares recorded outflows of **US$6 billion** in July, up from **US$3 billion** in June [10]. - **Short Interest**: As of July 31, short positions in China/HK equities were predominantly added in **Consumer Staples**, **Financials**, and **Communication Services** [11]. - **Passive Fund Trends**: Cumulative foreign passive inflows reached **US$11 billion** YTD, exceeding the **US$7 billion** level in 2024, while cumulative foreign active outflows totaled **US$11 billion**, a decrease from **US$24 billion** in 2024 [10]. - **Fund Flow Dynamics**: The report indicates a significant correlation between foreign passive fund flows to the **CSI 300** and northbound net flows historically, suggesting a stable trend in foreign investment [12]. This summary encapsulates the key points from the conference call, providing a comprehensive overview of the current state of the Chinese equities market and fund flow dynamics.

Summary of Tencent Holdings Conference Call Company Overview - **Company**: Tencent Holdings - **Industry**: Online Gaming and Internet Services - **Market Cap**: HK$5,111 billion / US$651 billion [4][33] Key Points Growth and Performance - **Q2 Expectations**: Tencent's domestic grossing is expected to decline mid to high single digits YoY in Q2, following a solid performance in Q1 [2][3] - **Flagship Titles**: Games like HoK and PKE showed healthy growth, with Delta Force contributing significantly despite a high base from DnFm [2][3] - **Delta Force**: This title is gaining traction, with its daily active users (DAU) and time spent per user surpassing PKE, indicating strong growth potential [2][11][13] Industry Trends - **Resilience Against Macro Uncertainty**: The online gaming sector is less affected by macroeconomic fluctuations due to its unique and immersive experiences, leading to a quasi-monopoly for developers [3][10] - **Evergreen Titles**: Loyalty among Chinese gamers to top IP franchises is increasing, supported by Tencent and NetEase's investments in evergreen titles, which reduces the risk associated with new game launches [3][10] - **Multi-Platform Strategy**: Game operators are adopting multi-platform strategies to enhance user retention and tap into higher ARPU segments, exemplified by Delta Force and PKE [3][10] Financial Metrics - **Revenue Growth**: Projected revenues for Tencent are expected to grow from Rmb 660,257 million in 2024 to Rmb 736,731 million in 2025 [7] - **Earnings Per Share (EPS)**: Expected EPS for 2025 is Rmb 27.29, with a growth trajectory leading to Rmb 33.64 by 2027 [5][7] - **Valuation**: Trading at 18x/16x 2025E/26E P/E, indicating potential long-term value [10] Future Catalysts - **Upcoming Releases**: Anticipated launches include Delta Force's console version in August, Valorant mobile, and the 10th anniversary of HoK in October, which could serve as growth catalysts [10][15] - **AI Integration**: The use of AI in gaming is enhancing user experience through improved content updates, matchmaking, and analytics, which supports user retention [9][10] Risks and Challenges - **Competitive Landscape**: The evolving competitive environment poses risks, including new business execution and rising costs associated with traffic acquisition and content [19][10] - **Regulatory Risks**: Ongoing regulatory scrutiny could impact operations and profitability [19][10] Investment Recommendation - **Rating**: Buy with a 12-month price target of HK$710.00, reflecting a forecasted stock return of 30% [4][17][33] Conclusion Tencent Holdings is positioned for growth despite macro uncertainties, driven by strong performance in evergreen games and a robust pipeline of upcoming titles. The company's multi-platform strategy and AI integration further enhance its competitive edge, although it must navigate regulatory and competitive challenges.

Investment Rating - The report assigns a "Buy" rating to major companies in the China Internet sector, including Alibaba, JD.com, Meituan, and Tencent [28]. Core Insights - The quick commerce sector in China is experiencing rapid growth, with a projected market size of Rmb760 billion by 2025, representing 4-5% of the e-commerce market [3]. - Major players like Alibaba and Meituan are significantly increasing their investments to capture market share, with Alibaba committing Rmb50 billion and Meituan surpassing 120 million daily orders [2][3]. - The competition is described as a "game of chicken," with companies expected to continue heavy investments until at least the Double 11 shopping festival [4]. Summary by Sections Quick Commerce Competition - Competition in quick commerce is intensifying, driven by substantial platform subsidies from major players [2]. - Alibaba's Taobao InstaShopping and Meituan are leading in daily order volumes, with Alibaba achieving 80 million combined daily orders and Meituan surpassing 120 million [2]. Market Size and Growth - The total addressable market (TAM) for quick commerce is expected to grow by 30% by 2025, primarily taking market share from traditional retail rather than e-commerce [3]. - The rapid increase in order volume is attributed to consumer behavior and effective coupon utilization strategies [3]. Financial Implications - Earnings cuts are anticipated across e-commerce giants due to the competitive landscape, with expected annual investments of Rmb25 billion from JD, Rmb25-30 billion from Alibaba, and Rmb25 billion from Meituan [4]. - The report forecasts a market share split of 50% for Meituan, 30% for Alibaba, and 20% for JD in the medium term [4]. Stock Recommendations - The report suggests a cautious approach towards Meituan due to high earnings expectations and valuation concerns, while recommending Alibaba for potential value extraction if executed well [7]. - JD's valuation is considered undemanding, and its performance will be monitored as trade in subsidies fades [7].

V i e w p o i n t | 25 Jun 2025 16:16:30 ET │ 19 pages Thematic Equity Strategy A Global Perspective on Artificial Intelligence CITI'S TAKE AI remains one of our top Growth themes in the US given its premium growth expectations at justifiable valuations. In this report we take a broader look at AI across the globe and our Enablers versus Adopters value chain delineation. We reiterate the need for value chain diversification within the theme while also stressing geographic reach. Investors solely focused on ...

Summary of Tencent Holdings Investor Meeting Company Overview - **Company**: Tencent Holdings - **Sector**: Internet/e-Commerce - **Description**: Tencent is a leading provider of messaging services, value-added services, online games, and advertising in China, with Weixin having over 1 billion domestic accounts [10][11]. Key Takeaways from the Investor Meeting AI Product Development - Tencent is investing in AI products that are in the post-launch but pre-monetization phase, including: - **Yuanbao app**: Achieved product-market fit and moved to launch phase [1] - **QQ Browser**: Recently upgraded to AI Browser [1] - **Weixin AI**: Early in the product-market fit journey [1] - Monetization is expected to begin product by product after several quarters, funded through operating leverage from existing businesses [1]. - The near-term cost impact will primarily come from depreciation, with profit being back-end loaded in the GPU lifecycle [1]. Financial Projections - **Net Income (Adjusted)**: - 2023A: CNY 157,688 million - 2024A: CNY 222,703 million - 2025E: CNY 251,880 million [3] - **EPS**: - 2023A: CNY 11.99 - 2024A: CNY 20.63 - 2025E: CNY 22.65 [3] - **P/E Ratio**: - 2025E: 20.75x [3] Game Experience and User Retention - AI enhances game experience through improved player onboarding, coaching, interaction, and cheating prevention, leading to better user retention [2]. - Tencent's key mobile games have shown an upward trend in 30-day user retention [2][19]. Business Services Growth Drivers - The Business Services segment has four structural drivers: 1. Mini Shops commission 2. CRM service and WeCom enterprise software 3. Security and real-time communications solutions 4. GPU rental [3] - Tencent believes in the long-term potential of enterprise services in China, focusing on software services for better margins and competitive products [3]. Fintech Services Growth - The Fintech segment has three structural drivers: 1. Consistent growth in wealth management 2. Resumed growth in credit business 3. Improvement in payment business after a decline [15]. Mini Shops in Weixin Ecosystem - Mini Shops are rapidly growing GMV and enhancing linkages with other Weixin activities, with multiple successful eCommerce templates to learn from [14]. - Monetization potential includes higher take rates and improved ad targeting due to SKU-level granularity [14]. Investment Rationale - The company maintains a **Buy** rating due to: - Strong market leadership - Growth potential from Weixin monetization - Resilient game business growth - AI and eCommerce opportunities [11]. Risks and Opportunities - **Downside Risks**: 1. Competition from new platforms 2. Regulatory challenges in fintech and gaming 3. Weak macroeconomic conditions [23]. - **Upside Risks**: 1. Faster-than-expected macro recovery 2. Successful new game launches 3. Synergies from ecosystem collaborations [23]. Conclusion - Tencent Holdings is positioned for growth through its AI investments, strong game retention, and expanding business services. The company faces risks from competition and regulation but has significant upside potential from its diverse business segments and market leadership.

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of HK$695, implying an expected share price return of 33.5% and a total return of 34.4% [4][8]. Core Insights - Tencent is positioned as a strong player in AI applications, leveraging its comprehensive Weixin ecosystem to enhance user targeting, content generation, and game stickiness through AI optimization [1][2]. - The company has made significant advancements in its Hunyuan large model, achieving top rankings in various benchmarks and expanding its multi-modal capabilities [3][6]. - Tencent Cloud is experiencing a notable increase in API calls, particularly in automatic speech recognition and text-to-speech, indicating a rapid adoption of AI technologies [1][3]. Summary by Sections AI Development and Infrastructure - Tencent aims to build an AI-native ecosystem to enhance its service capabilities for enterprise customers, focusing on large model innovation and infrastructure upgrades [2][3]. - The Hunyuan Turbo-S model ranks 8 in the Chatbot Arena benchmark and is among the top 10 for coding and math capabilities, showcasing Tencent's competitive edge in AI [3]. Agent Development - The Smart Agent Development Platform has been upgraded to enhance multi-agent collaboration and improve efficiency in corporate use cases [4][6]. - This platform is designed to support external customers in setting up their own AI agents, reflecting Tencent's commitment to expanding its AI offerings [6]. Knowledge Base and Product Matrix - Tencent has introduced several products to meet enterprise demands, including the Lexiang knowledge base for knowledge coordination and the marketing cloud agent for automated customer targeting [7]. - The integration of Tencent Hunyuan and DeepSeek large models aims to enhance individual employee productivity through AI Q&A and content generation [7]. Valuation - The target price of HK$695 is derived from a sum-of-the-parts (SOTP) valuation approach, applying various price-to-earnings (P/E) multiples across different business segments [8]. - The valuation breakdown includes online games, online advertising, social networks, fintech, and cloud/business services, indicating a diversified revenue stream [8].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings (0700.HK) with a 12-month target price of HK$595, indicating a potential upside of 15.2% from the current price of HK$516.50 [2][20]. Core Insights - Tencent's unique WeChat ecosystem and global gaming assets provide multiple monetization levers, enabling the company to deliver compounding earnings through macro cycles [2]. - The company is positioned as a key beneficiary of AI applications, particularly through its WeChat super-app and Tencent Cloud, which ranks among the top three public cloud players in China by scale [2]. - The report highlights the tangible benefits from AI-driven adtech upgrades, leading to improved click-through rates (CTR) across various advertising properties [12]. - Tencent's gaming segment continues to thrive, with record gross receipts from evergreen titles, indicating strong user engagement and productivity in game development [12]. - The fintech business has significant growth potential, particularly in wealth management and lending, with a focus on improving blended take rates [16]. Advertising - Advertising has benefited from AI-driven upgrades, with Video Account and Moments being the top two revenue streams in Weixin advertising [12]. - The company has not aggressively monetized live streaming e-commerce yet, viewing it as a transaction element within the Weixin ecosystem [12]. Gaming - Tencent's evergreen games, such as HoK and PKE, continue to achieve record grossing after years of operation, with expectations for healthier economics and reduced reliance on channels [12]. - The company is exploring cross-platform launches and maintaining close relationships with investee studios globally, focusing on Europe and Asia [12]. AI Investment and Monetization - Tencent is committed to investing a low teens percentage of revenue in capital expenditures, primarily for in-house AI model development and applications [12]. - The company is strategically focusing on PaaS and SaaS for external cloud services, aiming for more sustainable margins [12]. Fintech - The fintech segment emphasizes risk management as a top priority, with expectations for improved blended take rates and growth opportunities in wealth management and lending [16]. - The company anticipates a narrowing gap between revenue growth and operating profit growth through reinvestment of operating leverage from high-margin revenue streams into AI initiatives [16]. Financial Projections - Total revenues are projected to grow from RMB 660.26 billion in 2024 to RMB 836.65 billion by 2027, with a compound annual growth rate (CAGR) of approximately 8% [20]. - The report forecasts a significant increase in net profit, with non-GAAP net profit expected to rise from RMB 222.70 billion in 2024 to RMB 299.63 billion by 2027 [20].

Group 1 - Many investors view Tencent Holdings through a geopolitical lens due to uncertain regulatory cycles and geopolitical tensions [1] - The presence of ongoing oversight from officials contributes to the cautious sentiment among investors regarding Chinese companies [1] Group 2 - The article highlights the challenges faced by Chinese companies, including Tencent, in the current investment climate [1]

Summary of Tencent Holdings (700 HK) Conference Call Company Overview - **Company**: Tencent Holdings - **Sector**: Internet Software & Services - **Market Cap**: HKD 4,787,479 million (USD 613,996 million) [13][5] Key Discussion Points 1. **Strong Growth Prospects**: - Tencent's 1Q25 results exceeded expectations, driven by robust performance in domestic games and advertising. Revenue growth for domestic games is revised from 8% to 13% for 2025 [2][9] - The company reported a total revenue of RMB 180,022 million for 1Q25, reflecting a 13% year-over-year increase [17][9] 2. **Game Performance**: - Domestic games revenue grew by 24% year-over-year, significantly above the consensus of 15%, with key titles like Honour of Kings and Delta Force contributing to this growth [18][9] - International games revenue also saw a 23% increase, driven by titles such as Brawl Stars and PUBG Mobile [19][9] 3. **Advertising and Marketing Services**: - Marketing services revenue increased by 20% year-over-year, supported by higher user engagement and AI enhancements to the ad platform [21][9] - Video Account ad revenue grew over 60% year-over-year, indicating strong demand for advertising tools [21][9] 4. **AI Integration**: - Tencent is integrating AI features into its Weixin ecosystem, which is expected to enhance content generation and improve advertising effectiveness over time [2][9] - The company is leveraging its unique social graphs and community capabilities to differentiate its AI offerings from competitors [3][9] 5. **Financial Performance**: - Non-IFRS net income for 1Q25 was RMB 61,329 million, a 22% increase year-over-year [17][9] - The gross profit margin (GPM) improved by 2 percentage points to 56% [23][9] 6. **Capital Expenditure and Share Buybacks**: - Tencent plans to repurchase at least HKD 80 billion worth of shares in 2025, having already repurchased HKD 21 billion year-to-date [54][56] - The company incurred RMB 27 billion in capital expenditures in 1Q25, representing 15% of revenue [17][9] 7. **Future Outlook**: - Revenue for 2025 is projected at RMB 728,386 million, reflecting a 10% year-over-year growth [53][9] - The target price remains unchanged at HKD 630, indicating a potential upside of 20.9% from the current share price of HKD 521 [9][13] Financial Highlights - **Revenue Breakdown for 1Q25**: - Value-Added Services (VAS): RMB 92,133 million, up 17% YoY - Marketing Services: RMB 31,853 million, up 20% YoY - Fintech and Business Services: RMB 54,907 million, up 5% YoY [17][9] - **Earnings Per Share (EPS)**: - 2025 EPS estimate raised to CNY 28.72, reflecting a 1.6% increase from previous estimates [6][9] Risks and Considerations - Potential risks include regulatory challenges in the gaming sector, macroeconomic slowdowns affecting advertising budgets, and changes in user preferences [59][9] Conclusion - Tencent Holdings continues to demonstrate strong growth across its gaming and advertising segments, with significant investments in AI and share buybacks. The company maintains a positive outlook for 2025, supported by robust financial performance and strategic initiatives.

Summary of Tencent Holdings 1Q25 Earnings Call Company Overview - **Company**: Tencent Holdings - **Industry**: Internet Services - **Date of Report**: 15 May 2025 Key Financial Highlights - **1Q25 Performance**: - Revenue increased by **13% YoY**, exceeding expectations - Adjusted Operating Profit (OP) and Net Profit (NP) grew by **18%** and **22% YoY**, respectively, both beating estimates by **4%** due to Gross Profit Margin (GPM) expansion [2][11] Core Business Segments 1. **Gaming**: - **Near Term**: 1Q25 saw robust growth exceeding **20%** from existing and new games, alleviating concerns about tougher comparisons in 2H25 - Notable performances from games like HoK and CrossFire, with CrossFire becoming the **3rd largest mobile game in China** - Projected revenue growth of **+14%** for domestic games and **+22%** for international games in 2025E [3] 2. **Advertising**: - **Near Term**: Advertising revenue grew by **20%** in 1Q25, driven by enhancements in ad technology and increased inventory - Anticipated to outpace industry growth of **17%** in 2025E [4] 3. **Mini Shops**: - **Near Term**: Strong GMV growth due to accelerating merchant onboarding - Long-term potential compared to Mini Programs' GMV of **Rmb8 trillion** in 2024, with Mini Shops projected at **cRmb200 billion** [5] 4. **AI Monetization**: - **Near Term**: Management optimistic about navigating GPU supply issues - Long-term plans include adding AI features to products like Weixin, leveraging a user base of **1.4 billion** with an average engagement of **1.5 hours daily** [6] Margin and Profitability Outlook - **1Q25 Margin**: Adjusted NP growth of **18%** against **13%** revenue growth - Management expects positive operating leverage and incremental AI revenue to support margins [11] Valuation and Price Target - **Price Target**: Increased to **HK$710.00** from **HK$700.00** - **Current Price**: **HK$521.00** as of 14 May 2025 - **Market Cap**: **HK$4,837 billion** (approximately **US$620 billion**) [7][13] Earnings Estimates - **2025E**: Revenue projected at **Rmb742.8 billion**, with adjusted NP expected to grow by **19%** [15] Investment Thesis - Tencent's results provide enhanced clarity regarding earnings amidst macro uncertainties - Management emphasizes a "long runway" for growth across various business lines, including gaming, advertising, e-commerce, and AI monetization - Despite premium valuation, Tencent offers high earnings visibility and growth potential [12] Risks - Key risks include competitive landscape changes, execution of new business strategies, integration of investments, rising operational costs, and regulatory challenges [19] Conclusion - Tencent Holdings demonstrates strong growth across its core segments, with a positive outlook for future earnings driven by strategic initiatives in gaming, advertising, and AI. The company maintains a "Buy" rating with a revised price target reflecting its growth potential and market position.