CICC: Maintains "Outperform" rating on TENCENT (00700) with a target price of HK$666

CICC issued a research report maintaining an "Outperform" rating on TENCENT (00700) with a target price of HK$666, corresponding to 20x and 19x Non-IFRS P/E for 2026 and 2027 respectively, implying 68% upside from the current share price. The bank kept its 2026 and 2027 revenue and Non-IFRS profit forecasts unchanged. On November 4, Tencent Hunyuan officially released Hy4, expanding pre-training and post-training scale compared with the Hy4 preview open-sourced on August 28, with both the domestic and international versions of WorkBuddy simultaneously integrating Hy4. The bank believes model iteration is only one dimension of competition, and Tencent's strategic focus is shifting toward Agent context accumulation, with the combined advantage of horizontal ecosystem integration and positive context accumulation potentially more certain. CICC's key views are as follows: Introducing vision and computer tasks, improving usability in productivity scenarios On November 4, Tencent Hunyuan officially released Hy4, expanding pre-training and post-training scale compared with the Hy4 preview open-sourced on August 28. The company stated that Hy4 ranks among the strongest open-source models for the first time and plans to open-source the model weights in the near term. On the same day, both the domestic and international versions of WorkBuddy integrated Hy4, launching a two-day limited-time free trial. Tencent Hy4 is in the same parameter magnitude as the preview, with 770B total parameters, 49B activated parameters, and 1M context, with API pricing also unchanged at RMB6 input, RMB18 output, and RMB0.3 cache. Capability upgrades are mainly reflected in: 1) improved stability for long-horizon tasks, optimizing the preview version's issues of excessive self-verification and mid-chain breakpoints in long workflows; 2) with visual understanding combined with tool calling, Hy4 can complete tasks such as fine-grained image processing and complex chart analysis; 3) the ability to operate computers via graphical interfaces and command lines, deepening workflow depth in office scenarios. Meanwhile, Hy4 received specialized training for professional software such as Blender and cross-application long-horizon tasks. The company acknowledged that Hy4 still has a considerable gap versus top closed-source models on high-difficulty test sets, and made clear that Hy5 will be further scaled up, with plans to release Hy4 Flash in the near term focusing on model cost-effectiveness and inference speed, maintaining higher-frequency collaborative iteration with products. Model iteration is only one dimension of competition; strategic focus shifts to Agent context accumulation Buddy One, previously released at Tencent's Global Digital Ecosystem Summit, converges the three layers of model, Harness, and context into a single Agent entry point. WorkBuddy serves both as the delivery interface and as the collection end for training data. The bank believes context accumulation may continuously affect the following aspects: 1) When model capabilities are comparable, it affects single-task success rates. 2) It affects the feedback quality of Co-Design and the direction of targeted optimization by the model team. In WorkBuddy office scenario evaluations, Hy4 achieved an average effectiveness score of 83.18 and a task pass rate of 96.15%, ranking first domestically in 9 of 12 scenarios. 3) It raises customer migration costs. The bank reiterates its previous report view that, given the gap between the Hunyuan series and top closed-source models, horizontal integration on the ecosystem side provides a floor, and Buddy One upgrades the entry point into an account system, allowing context to begin accumulating positively; the combined advantage of the two may be more certain relative to model capabilities. Risk warnings Macroeconomic uncertainty; regulatory factors; costs or expense ratios higher than expected.