Tencent: A Resilient Buy Amid Uncertainty

倪凯多王子
01-12

$TENCENT(00700)$  $Tencent Holding Ltd.(TCEHY)$  $Tencent HK SDR 10to1(HTCD.SI)$ Tencent presents a compelling opportunity to invest in one of China’s leading tech giants at a significant discount. Despite recent inclusion on the US Pentagon blacklist, Tencent’s strong fundamentals and growth trajectory make it a resilient choice for long-term investors.

In H1 2024, Tencent’s revenue grew 8% YoY to RMB 320.6 billion, with net profit surging 72% YoY to RMB 89.5 billion. Gross margins improved to 53%, reflecting operational efficiency and a focus on high-margin businesses like gaming and advertising.

Tencent’s diversified revenue streams provide stability during geopolitical uncertainties. International gaming revenue grew 14% YoY in FY2023, while fintech and business services contributed 33% of total revenue, showcasing strong growth in domestic and non-cyclical sectors.

With a forward P/E of ~15.1x, well below its historical average of 22x-28x, Tencent is significantly undervalued. The company also boasts RMB 185 billion in cash reserves, a debt-to-assets ratio of 42%, and proactive shareholder returns through dividend hikes and share buybacks.

While geopolitical risks persist, Tencent’s proven market leadership, financial resilience, and innovation provide a strong foundation for long-term growth. At this valuation, Tencent is a rare opportunity for investors seeking value amid uncertainty.

Modified in.01-12
Tencent and CATL included in the U.S. Department of Defense CMC list
Tencent and Contemporary Amperex Technology Co., Limited were included in the CMC list of the U.S. Department of Defense, causing stock prices to plummet. Tencent said being included in the list was a mistake and had no impact on the business. Contemporary Amperex Technology Co., Limited also called being included in the list a mistake and did not engage in military-related activities. Chinese companies included in the CMC list have previously successfully challenged through legal channels and may be discharged through litigation.
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