HSBC Research reports that the main driver of the next round of reassessments of the Mainland Internet industry is profit growth. It will reassess its stock options framework in three aspects such as growth quality, valuation misallocation and shareholder returns.

This line indicates a preference for online gaming over advertising, e-commerce and local services. ON THE INTERNET, LOOK AT TENCENT (00700.HK) AND NETEASY (NTES.US); IN ADVERTISING, LOOK AT TENCENT'S ABILITY TO CAPTURE THE BENEFITS OF ARTIFICIAL INTELLIGENCE. In addition, domestic operating profit remains solid amid intensifying competition, and continued good looks at Meithong (03690.HK), slowing store competition will help its profit margin rise, while a smaller year-on-year decline in average orders in the second half provides a cushion for growth in catering revenue. Each of the above stocks is rated “Buy” by the Bank.

The company's target price for Tencent is $450, NetEasy has a target price of $126, a multi-target price of $208 and a target price of USD170.