CMB International Securities has issued a research report stating that with the valuation of China's internet sector at historical lows and earnings forecast revisions nearing an end, it prefers companies with leading B-end commercialization, significant supply chain and channel ecosystem advantages, reasonable valuations, and strong shareholder return capabilities. The firm's top picks for the sector are Alibaba (BABA.US), TENCENT (00700), KUAISHOU-W (01024), and JOYY Inc. (JOYY.US).

The report forecasts that revenue growth for internet companies will accelerate in the second half of the year, driven by factors including the continued acceleration of cloud business, easing base pressure in e-commerce, a recovery in average order value for instant retail, and a concentrated launch of game products. Profits are also expected to gradually absorb the concentrated drag from competition in instant retail in the latter half, potentially turning profitable. Coupled with an improving trend in cloud business margins and stabilizing e-commerce competition, the report views the path for profit recovery in the sector as clear.

CMB International maintains a "Recommended" rating on the internet sector. It identifies future catalysts including continuous iteration of models and products, commercialization progress exceeding expectations, acceleration in cloud business growth and margin expansion, and enhanced shareholder returns. The report also suggests monitoring the potential valuation upside driven by model capability iteration in companies such as KNOWLEDGE ATLAS (02513) and MINIMAX-WP (00100).