A report released by China Merchants International said that while the stock market has weakened overall recently, the share price of the Mainland's flagship internet platform has remained resilient, citing an improved competitive environment and an improvement in the profit outlook. Companies with higher losses remain a concern after the quarterly results, such as many (PDD.US), Tencent Music (TME.US) and NetEasy (NTES.US), which remain attractive in terms of business strength, market position and valuation. THE BANK POINTED TO THE STRONG OVERALL MARKET POSITION AND PROFITABILITY OF THE MAINLAND'S FLAGSHIP INTERNET PLATFORM, WITH THE INDUSTRY'S TOP PICKS: TENCENT (00700.HK), ALIBABA.US AND BILLI.US, EACH WITH TARGET PRICES OF HK$474, $126 AND $21.

The bank pointed to mainland major Internet platforms such as Alibaba, Tencent and Merion-W (03690.HK) remaining resilient in this year's second-quarter results, with share prices showing regional turbulence. However, some companies that expected higher growth earlier due to guidance failing to meet market expectations and macroeconomic concerns led to a significant decline in valuations. The median valuation of the line covering the company remains at historic lows (9.8x and 9.9x earnings in FY2024/2025). Although macroeconomic pressures have not eased, the continued introduction of supportive policies by the Mainland government (such as switching home appliances to old ones) has remained a positive catalyst for positive progress in individual stocks (such as Ali and Cloud Music's (09899.HK) dual major listing in Hong Kong).

China Securities International is optimistic about the industry, favoring companies with the following characteristics: first, stable revenue growth, stable or improved profit growth through efficiency gains and losses; second, high visibility shareholder returns through cash dividends and share buybacks; and third, valuation support. The line's top picks are Tencent, Alibaba and Beep Milo.