Tencent Holdings (0700.HK) Valuation and Investment Logic Analysis

As of December 29, 2025, Tencent Holdings closed at

, with a year-to-date gain of [0]. The current market capitalization is , and the price-to-earnings ratio (TTM) is [0]. It is worth noting that the “around HK$400” mentioned in the post has a significant gap with the current actual share price—current share price is about higher than HK$400.

[0]:

PE Multiple	Corresponding Share Price	vs Current Share Price
20x	HK$548	-8.1%
21.8x (Current)	HK$596.5	Benchmark
24x	HK$655	+9.8%
25x	HK$682	+14.3%

Calculated based on the estimated 2025 earnings per share (EPS) of approximately

(reverse-derived from current PE of 21.8x):

• 20-25x PE corresponds to share price range: HK$548-HK$682
• Current share price of HK$596.50 is at 21.8x PE level
  , which is in the lower-middle part of the reasonable valuation range
• HK$400 is equivalent to only about 14.6x PE
  , significantly lower than current market pricing

Three-scenario valuation based on Discounted Free Cash Flow (DCF) model[0]:

Scenario	Intrinsic Value	vs Current Share Price	Key Assumptions
Conservative Scenario	HK$500.57	-16.1%	Zero growth, high discount rate
Base Scenario	HK$635.97	+6.6%	8.2% revenue growth, 41.4% EBITDA margin
Optimistic Scenario	HK$994.98	+66.8%	11.2% revenue growth,43.4% EBITDA margin
Probability-Weighted Value	HK$710.51	+19.1%	-

:

• Base intrinsic value is HK$636
  , with 6.6% upside potential vs current share price
• HK$400 is far below the conservative scenario’s intrinsic value of HK$500
  , belonging to deep value range
• Probability-weighted fair value is HK$711
  , meaning current share price still has 19% upside potential

###3. Technical Analysis Perspective

Current technicals show

[0]:

• Support Level
  : HK$590.52
• Resistance Level
  : HK$607.42
• 200-day Moving Average
  : HK$562.75 (long-term uptrend line)
• Beta Coefficient
  :0.85 (lower volatility relative to market)

###1. Sustained High Industry Prosperity

According to data from the “2025 China Game Industry Report”[1]:

• 2025 China game market revenue is expected to reach RMB 350.789 billion
  , up 7.68% YoY, hitting a new historical high
• Game user base increases to 683 million
  , up1.35% YoY, also a new historical high
• Overseas sales revenue of self-developed games reaches US$20.455 billion
  , up10.23% YoY, exceeding RMB100 billion for 6 consecutive years

:

• Console Games
  : Actual sales revenue of RMB8.362 billion, surging 86.33% YoY, 3 consecutive years of explosive growth
• Mini Program Games
  : Revenue reaches RMB53.535 billion, up34.39% YoY, becoming the biggest highlight

###2. Global Expansion of Tencent Games

Tencent’s game business set a record of

in 2025, growing against the industry slowdown, thanks to the success of international hit games like “Dying Light: The Beast”[2].

gives Tencent a target price of HK$775 with a “Buy” rating[3]:

• Management believes international game market growth rate is higher than external forecasts
• AI drives game operation efficiency improvement
• Potential of emerging markets and new business models is underestimated by the market

###3. Growth Logic of Game Business

:

1. Internationalization Strategy
   : Tencent has built a global game版图 through mergers & acquisitions and independent development
2. IP Operation Capability
   : Owns super IPs like “Honor of Kings” and “Peacekeeper Elite”
3. Technology Empowerment
   : AI improves game development efficiency and user experience
4. Cross-terminal Interoperability
   : Continuous incremental contribution from client and multi-terminal interoperability

###1. Talent Reserve and Technical Strength

In December 2025, Tencent appointed

as Chief AI Scientist[4], demonstrating its ambition in the AI field.

###2. Commercialization Progress of Hunyuan Large Model

According to market research data, Tencent’s Hunyuan Large Model is expected to

[5], which will be an important milestone for Tencent’s AI commercialization.

:

• Game Development
  : AI-assisted game design, testing, and operation
• Advertising System
  : AI optimizes ad delivery efficiency and conversion rate
• Content Recommendation
  : Improves user experience and platform stickiness
• Enterprise Services
  : Enhances Tencent Cloud’s AI service capabilities

###3. Practical Contribution of AI to Business

Goldman Sachs maintains a “Buy” rating on Tencent, optimistic about

, believing [3].

:

• Cost Reduction & Efficiency Improvement
  : Lower game development and operation costs
• Revenue Growth
  : AI-driven personalized advertising and content recommendation
• New Business Opportunities
  : AI SaaS services, enterprise-level AI solutions

###1. Valuation Judgment

:

• Relative Valuation: HK$400 corresponds to only ~14.6x PE, significantly lower than industry average and Tencent’s historical valuation level
• Absolute Valuation: HK$400 is far below the conservative scenario’s intrinsic value of HK$500
• Margin of Safety: Provides 33% downside protection (from HK$596.50 to HK$400)

:

• Corresponding to 21.8x PE, at the median of historical valuation
• 6.4% lower than DCF base value
• Valuation is attractive considering growth prospects

###2. Business Growth Logic

:

• High industry prosperity, sustained domestic market growth
• Successful overseas expansion, effective internationalization strategy
• AI empowerment improves efficiency and profitability

:

• Sufficient talent reserve and enhanced technical strength
• Hunyuan Large Model expected to be profitable in 2025
• AI empowers all business lines, enhancing long-term competitiveness

:

• WeChat Ecosystem
  : Strong growth in Video Accounts advertising revenue
• FinTech
  : Steady growth in payment business and wealth management
• Enterprise Services
  : Improved AI capabilities of Tencent Cloud

###3. Risk Tips

:

1. Regulatory Risk
   : Game version number approval, anti-monopoly regulation
2. Competitive Risk
   : Intensified competition in domestic game market
3. Macroeconomic Risk
   : Slowdown in China’s economic growth affecting consumption
4. Exchange Rate Risk
   : Hong Kong stock market and exchange rate fluctuations

:

• Short-term consolidation, lack of clear direction
• Currently close to support level of HK$590.52, need to watch if it can hold

###4. Investment Strategy Recommendations

:

:

• Strongly Recommend Buy
• Provides rich margin of safety
• Extremely attractive valuation

:

• Recommend Buy
• Corresponding to18-20x PE
• Lower limit of reasonable valuation range

:

• Recommend Hold or Buy on Dips
• Reasonable valuation, clear growth logic
• Short-term consolidation provides加仓 opportunities

:

• Cautiously Hold
• Corresponding to above24x PE
• Watch for fundamental fulfillment

:

Based on

and , driven by game business internationalization, AI empowerment, and enterprise services growth, Tencent Holdings still has [0][3].

:

1. Game Business
   : Steady domestic growth + breakthrough in overseas expansion
2. AI Empowerment
   : Improves efficiency and competitiveness of all business lines
3. WeChat Ecosystem
   : Continuous advancement of Video Accounts and advertising monetization
4. Valuation Repair
   : Regression from current reasonable valuation to intrinsic value

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[0] Jinling API Data - Tencent Holdings (0700.HK) Real-time Quotes, Company Overview, Financial Analysis, Technical Analysis, DCF Valuation

[1] Yahoo Finance Hong Kong - “China Game Revenue Expected to Reach RMB350.7 Billion This Year, Users Up1.35% YoY, Both Hit Historical Highs” (https://hk.finance.yahoo.com/news/今年中國遊戲收入料達3-507億人幣-用戶年增1-35-均創歷史新高-035730002.html)

[2] Bloomberg - “Tencent Goes Hands-On to Reshape $10 Billion Global Games Empire” (https://www.bloomberg.com/news/articles/2025-12-09/tencent-goes-hands-on-to-reshape-10-billion-global-games-empire)

[3] Yahoo Finance Hong Kong - “Nomura Gives Tencent Target Price of HK$775, Management Says Market Forecasts Underestimate Emerging Market Game Potential” (https://hk.finance.yahoo.com/news/野村予騰訊-00700-目標775元-管理層指市場預測低估新興市場遊戲潛力-020101641.html)

[4] Bloomberg - “Tencent Appoints Former OpenAI Researcher Its Chief AI Scientist” (https://www.bloomberg.com/news/articles/2025-12-17/tencent-appoints-former-openai-researcher-its-chief-ai-scientist)

[5] Yahoo Finance Image - 2020-2025 Forecast of China’s AI Software Market Share, Showing Tencent’s Hunyuan Large Model Expected to Achieve Commercial Profitability in2025 (https://s.yimg.net/ny/api/res/1.2/z6bwGJxM4XNf3QuRTFVW.Q--/YXBwaWQ9aGlnaGxhbmRlcjt3PTY0MDtoPTM2MA--/https://media.zenfs.com/zh-cn/bloomberg_chinese_simplified_41/9d2df8d7c05081ab57ef09124ed8dd6e)