---
endpoint: analytics
pattern: Internet
status: done
latency_ms: 199730
conversation_id: 7cff27f0-97bf-4470-bff5-cd06b17997f1
citations: 8
created: 2026-05-31 21:55:20Z
---

# Is CLSA incrementally more positive/negative on Tencent. If so, why?

**Yes — CLSA is incrementally more positive on Tencent.** Lead analyst **Elinor Leung, CFA (CLSA parent, Hong Kong)** has progressively raised both rating conviction and target price over the last twelve months, culminating in **High-Conviction Outperform (HC O-PF) with a HK$645 TP (≈ +24% upside vs HK$521 spot on 14 May 2025)** [1][2]. The trajectory is the cleanest evidence — see table below.

Note on corpus: latest CLSA-parent Tencent dedicated note in this archive is dated 14 May 2025 (1Q25 results). The 29 June 2025 *Global Themes 2025 — Half-time review* refreshes the AI/cloud read-through but does not change the stock call.

---

### 1. Rating & target-price trajectory (per the May 2025 recommendation history disclosure)

| Date | Rating | TP (HK$) | Comment |
|---|---|---|---|
| 25 Jan 2024 | BUY | 440 | — |
| 15 May 2024 | BUY | 480 | — |
| 28 Jun 2024 | O-PF | 480 | CLSA rating system change (BUY/O-PF/U-PF/SELL → O-PF/HLD/U-PF) |
| 01 Nov 2024 | O-PF | **500** | First incremental TP raise post-rating-system reset |
| **20 Mar 2025** | **HC O-PF** | **645** | **Step-change: upgrade to High-Conviction Outperform; TP +29%** |
| 14 May 2025 | HC O-PF | 645 | Reiterated post-1Q25 beat; forecasts fine-tuned [2][8] |

[8] HC O-PF / HC U-PF tiers were only introduced on 16 Dec 2024 — Elinor Leung moved Tencent onto the top conviction tier at the **first opportunity** for which it became available (20 March 2025), with TP simultaneously stepped up from HK$500 to HK$645. That is the single most concrete incremental positive signal in the file.

---

### 2. Why incrementally more positive — the drivers

**A. 1Q25 results beat across the board, with quality of beat skewed to high-multiple lines (games + ads)** [1][4]:

| 1Q25 metric | CLSA preview (11 May) | 1Q25 actual (14 May) | Delta |
|---|---|---|---|
| Total revenue | +10.0% YoY to Rmb175.3bn | **+12.9% YoY to Rmb180bn** | +3% beat |
| Adj. EBIT | +15.0% YoY to Rmb67.3bn | **+18.3% YoY to Rmb69.3bn** | +3% beat |
| Online games | +15.8% YoY to Rmb55.7bn | **+23.7% YoY to Rmb59.5bn** | Biggest beat |
| Domestic games | — | +24.3% YoY to Rmb42.9bn | Re-acceleration |
| International games | — | +23% YoY to Rmb16.6bn | Re-acceleration |
| Online ads | +17.4% YoY to Rmb31.1bn | **+20.0% YoY to Rmb31.9bn** | Beat |

CLSA explicitly labelled the trajectory shift in the note title — moving from "*Solid* games and ad performance" (11 May preview) to "***Accelerated*** game and ad growth" (14 May post-results) [1][4]. The post-results note also raises the bar for 2Q25: CLSA forecasts total revenue +11.5% YoY to Rmb180bn, with **mid-teens domestic games, ~22% international games, ~18% online ad growth and accelerating FBS/cloud GPU demand**; adj. EBIT +15% YoY to Rmb67bn (37% margin).

**B. Quality of the games beat — duration of the cycle is being re-rated**: domestic 1Q25 was carried by evergreen IP plus new hits — Honour of Kings (Rmb15bn), Peacekeeper Elite Rmb9.1bn (+26% YoY), Cross Fire Rmb4.2bn (+20% YoY), DnF Mobile, and Delta Force. International was driven by Brawl Stars, Clash Royale, PUBG Mobile (overseas US$181m, +16% YoY) and the **Path of Exile 2 paid-early-access + MO.CO launch** [1]. Pipeline visibility is now multi-year — Valorant Mobile, Hidden One, NIKKE, Passionate NBA Mobile, Path of Exile 2 console — so the previous "post-approval-pause normalisation" framing has shifted into "structural pipeline".

**C. WeChat / Weixin AI is the new optionality layer.** CLSA's reiteration explicitly cites Yuanbao integration as a Weixin contact, Weixin Search powered by HunYuan Turbo / HunYuan T1 / DeepSeek-R1, AI image generation in Official Accounts, AI video templates in Video Accounts, and future Agentic AI for in-Weixin task completion [2][3]. The thesis upgrade is that Tencent can "match the social graph with the vast amount of information, transaction and mini programs", opening new monetisation surfaces beyond ads [2]. In the 29-Jun *Global Themes* refresh, CLSA reiterates that **AliCloud is excelling in AI cloud, while Tencent is best positioned to gain from the AI uplift** [6].

**D. Capex inflection validates the AI commitment** — Tencent 1Q25 capex was Rmb27.5bn / +91% YoY (Rmb30bn on CLSA's own table), tracking the Rmb24bn 1Q25 figure for Alibaba [7]. CLSA's view is that internet clouds are regaining share with revenue growth re-accelerating since 4Q24 toward ~20% in 2025 with higher margins [6]. The earlier bear case (capex would lever down ROIC without revenue follow-through) is fading.

**E. Capital return supports the floor.** Tencent repurchased ~43m shares (HK$17.1bn) in 1Q25 against an HK$80bn buyback target for full-year 2025 — i.e., ~21% executed in Q1 with three quarters left, on top of the dividend [1].

**F. Macro/portfolio framing**: in the 11 May preview, CLSA already framed Tencent as **"defensive amidst tariff uncertainties"** with a low-teens revenue CAGR and 15–20% earnings CAGR over the next three years — a relatively rare combination in the China-internet cover that supports the HC O-PF designation.

---

### 3. Where they have NOT moved (the offsetting / cautious nuance)

- **TP unchanged at HK$645** since the 20 Mar 2025 upgrade — the 14 May beat was absorbed as "fine-tuning" rather than another TP raise. Stock now at 15x 26CL adj PE [2] — implying CLSA sees re-rating room from execution/AI delivery, not multiple expansion alone.
- CLSA flags that **the revenue and profit growth gap may narrow as Tencent steps up AI investment** — i.e., they are explicitly accepting near-term margin give-back to fund the AI build [1][3]. Operating leverage moderates in 2025–26 vs the 2024 step-up.
- Risk acknowledgements unchanged: gaming-market saturation, WeChat monetisation uncertainty, regulatory (antitrust/data/gaming) and the US listing of Tencent on the alleged "China military companies" register — last item carries tail risk that CLSA has not removed.
- Within Tencent's stable, **Huya is flat (revenue ~Rmb1.5bn, 10% livestream decline)** and TME's social-entertainment revenue is -12% YoY — pointing to selective rather than wholesale franchise strength [5].

---

### 4. Bottom line

CLSA's incremental positioning on Tencent over the last 12 months is a clear **upgrade ladder**: BUY (HK$440, Jan-24) → O-PF (HK$500, Nov-24) → **HC O-PF (HK$645, Mar-25, reiterated May-25)** [8]. The conviction shift is anchored in (i) a 1Q25 beat driven by games (+23.7% YoY) and ads (+20% YoY) [1][4]; (ii) Weixin's accelerating AI monetisation roadmap (Yuanbao / AI Search / Agentic AI) [2][3]; (iii) capex re-acceleration validating the AI build [6][7]; and (iv) HK$80bn 2025 buyback. The only mildly cautionary tilt is the willingness to accept a tighter revenue–profit gap to fund AI investment — but CLSA explicitly treats this as positive optionality rather than margin risk.

---
**Sources**
[1] Tencent — HC O-PF (Accelerated game and ad growth) — CLSA, Elinor Leung, 14 May 2025 — 607959476LinqAlpha.PDF
[2] Tencent — HC O-PF (Accelerated game and ad growth), HC O-PF reiteration / TP HK$645 — CLSA, 14 May 2025 — 607959476LinqAlpha.PDF
[3] Tencent — HC O-PF, Tencent to step up AI investment section — CLSA, 14 May 2025 — 607959476LinqAlpha.PDF
[4] Tencent — HC O-PF, "Accelerated game and ad growth" earnings change section — CLSA, 14 May 2025 — 607959476LinqAlpha.PDF
[5] Tencent — HC O-PF, TME / Huya / Video Accounts detail — CLSA, 14 May 2025 — 607959476LinqAlpha.PDF
[6] Global Themes 2025 (Half-time review), China internet — tech-driven growth section — CLSA, 29 Jun 2025 — 607960638LinqAlpha.PDF
[7] Global Themes 2025 (Half-time review), Alibaba vs Tencent quarterly capex table — CLSA, 29 Jun 2025 — 607960638LinqAlpha.PDF
[8] Tencent — HC O-PF, Recommendation history disclosure (Jan 2024–May 2025) — CLSA, 14 May 2025 — 607959476LinqAlpha.PDF

## Citations

- [1] **607959476LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959476LinqAlpha.PDF>
- [2] **607959476LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959476LinqAlpha.PDF>
- [3] **607959476LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959476LinqAlpha.PDF>
- [4] **607959476LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959476LinqAlpha.PDF>
- [5] **607959476LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959476LinqAlpha.PDF>
- [6] **607960638LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607960638LinqAlpha.PDF>
- [7] **607960638LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607960638LinqAlpha.PDF>
- [8] **607959476LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607959476LinqAlpha.PDF>

