According to a research report released by Citigroup, the performance of most Mainland Chinese Internet companies in the first quarter of 2024 was better than expected, with profit growth exceeding revenue growth. The bank noted that some Internet companies have already begun to comment on their use of artificial intelligence technology to save costs for internal operations, reflecting that Internet companies are likely to be among the first to adopt and apply AI technology to improve operational efficiency and support enterprise monetization. Since early April, benefiting from the improvement in fundamental quality and the improvement in AI operations, this sector has shown a slight rebound. However, the bank believes that Mainland Chinese Internet companies are still attractive in the case of low valuation demand.

Citigroup is bullish on Tencent (00700.HK) as a core holding in the second half of the year. They also see growth potential in PDD.US and YMM.US, opportunities for Ctrip (09961.HK) (TCOM.US) and Meituan-W (03690.HK) to capture service expenditure transfers, and defensive diversification investments in NetEase (09999.HK) (NTES.US) and Tencent Music (01698.HK) (TME.US).

Citigroup has a target price of 515 yuan for Tencent and maintains a 'buy' rating; a target price of $198 for PDD and maintains a 'buy' rating; a target price of 12 yuan for YMM and maintains a 'buy' rating; a target price of $66 for Ctrip's US stocks and maintains a 'buy' rating; and a target price of 140 yuan for Meituan and maintains a 'buy' rating.