Tencent Holdings (00700.HK) In-depth Analysis of Valuation and Business Support

• Stock Price and Market Capitalization: HK$596.5, market cap approx. HK$5.42 trillion; P/E (TTM) 21.80x, P/B 3.81x, ROE approx. 20.29%, net profit margin approx. 29.93%[0].
• DCF Scenario Valuation (using 5-year historical average and analyst expectations):
  • Conservative: HK$500.57 (-16.1%)
  • Base: HK$635.97 (+6.6%)
  • Optimistic: HK$994.98 (+66.8%)
  • Probability-weighted target: HK$710.51 (+19.1%)[0].
• Relative Valuation: Based on the base DCF target price of HK$635.97, the upside potential is approx. 6.6%, overall in the “reasonably low” range[0].
• Broker Views: Goldman Sachs maintains a “Buy” rating; GF Securities also maintains a “Buy” rating and believes AI will become a new business gene[1][2].

• Current Phase: Sideways consolidation, range approx. HK$590.52-HK$607.42; MACD signal indicates “no clear crossover (bullish bias)”, KDJ is bearish, RSI is in normal range, trend is sideways fluctuation[0].
• Beta (vs. Hang Seng Index): approx. 0.85, volatility slightly lower than the broader market[0].

• Classification: Low risk, accounting is conservative[0].
• Profitability: High net profit margin, high ROE, and high profit quality, providing a safety cushion for long-term valuation[0].

• Video Accounts: AI-driven ad platform upgrade and increased Video Account engagement are key drivers of ad business growth; Video Accounts complete the short video loop in the WeChat ecosystem, converting social traffic into high-value video ad inventory[3].
• Omnichannel Operation: Building a private domain ecosystem with Mini Programs, WeChat Work, Official Accounts, and Video Accounts, with outstanding private domain conversion value in high-AOV industries (e.g., automotive, luxury goods)[3].
• AI Integration: The Hunyuan Large Model significantly improves the accuracy of ad matching (“people finding goods” and “goods finding people”), enhancing ad monetization efficiency[3].
• Intelligent Assistant Penetration: Hunyuan is seamlessly embedded in WeChat ecosystem scenarios such as chats, Moments, and Mini Programs, increasing user dependency and ecosystem stickiness[4].

• Domestic Evergreen Operation: “Honor of Kings” 10th anniversary DAU approx. 139 million; “Peace Elite” maintains high retention via modes like “Metro Escape”; existing games continue to contribute cash flow through content updates and event operations[1].
• Overseas High Growth: Q3 2025 international market game revenue grew approx. 43% YoY, accounting for approx. one-third of total game revenue[1].
• Capital Cooperation and Distribution Empowerment:
  • Invested in Ubisoft’s Vantage studio (approx. €1.16 billion, holding approx. 26% stake) to strengthen global IP layout and collaborative development[5].
  • Overseas adopts “investment + empowerment” model, forming synergy with Supercell, Riot Games, etc., to amplify cooperation value in channel distribution, esports ecosystem, and localized operations[1][6].
• Category Focus: Abandoned “full category” approach, focused on advantageous tracks, using “domestic polishing - global replication” path to reduce trial-and-error costs and improve success rate[1].
• AI Cost Reduction and Efficiency Improvement: Hunyuan Large Model improves R&D and operation efficiency in art resources, gameplay testing, and operation delivery, alleviating cost pressures of high-precision asset generation and localization[1].

• Hunyuan Large Model: As a technical base, runs through R&D, operation, and ecosystem building, becoming a new business gene[2].
• Application Scenarios: Fully penetrates into advertising (intelligent matching), games (development efficiency improvement, anti-cheating, NPC and AI teammates), enterprise services, and office efficiency improvement, driving medium-to-long-term growth[1][2][3][4].

• International Layout: Tencent Cloud expanded in ASEAN, Northeast Asia, Europe, Middle East, and Americas, winning multiple large projects and localized infrastructure orders to enhance international brand and revenue scale[1].

1. Domestic game growth is highly dependent on existing operations, with limited incremental new games; continuous innovation and supply iteration are needed[1].
2. Overseas business has certain dependence on partner studios (Supercell, Riot, etc.); needs to maintain innovation rhythm for flagship product generational replacement[1].
3. Intensified global competition: Overseas high-end market still faces resource and channel competition from Microsoft, Sony, etc.; ByteDance’s rise in casual games and content distribution brings structural pressure[1].

• Valuation Judgment: Based on base DCF valuation (target price approx. HK$636) and current price of HK$596.5, valuation is generally in a reasonably low range with 6%-19% upside potential for recovery; there is certain downside space in conservative scenarios, need to pay attention to macro and regulatory changes[0].
• Catalysts: ARPU improvement from Video Accounts and AI-driven advertising; continuation of high growth rate of overseas games; landing of global orders for cloud and enterprise services[1][3].
• Operation Advice: Suitable for long-term value investors to build positions in batches at “reasonably low” valuation; short-term trading needs to pay attention to Hang Seng Index style and platform regulatory sentiment; focus on tracking Video Accounts’ MAU/duration and paid conversion, overseas game proportion and profit margin, cloud business orders and loss improvement progress.

[0] Jinling API Data (Real-time Market, Company Overview, Financial Analysis, DCF Valuation, Technical Analysis)
[1] Goldman Sachs - Maintains Tencent “Buy” Rating, Optimistic About Cloud Business Internationalization and AI-Enabled Long-Term Growth (Securities Times, 2025-12-16): https://www.stcn.com/article/detail/3542483.html
[2] GF Securities - Maintains Tencent “Buy”, AI Becomes New Business Gene, Target Price HK$754.73 (Hexun.com, 2025-12-19): https://funds.hexun.com/2025-12-19/222870679.html
[3] TopMarketing - Quarterly Revenue Exceeded HK$60 Billion for the First Time, Is Tencent Games’ “Iron Throne” More Stable in 2025? (2025): https://www.itopmarketing.com/info21543
[4] Touzijie/36kr - In 2025, AI is Repeating the Internet Playbook (Hunyuan Penetrates WeChat Ecosystem, Yuanbao Integrates into Video Accounts/WeChat Work/Official Accounts, etc.) (2025): https://news.pedaily.cn/202512/559197.shtml; https://m.36kr.com/p/3612255778206210
[5] 36kr - Tencent Invests €1.16 Billion in Ubisoft, Still Obsessed with the Game Field (2025-12-01): https://eu.36kr.com/zh/p/3573987663395973
[6] QQ News - From “Genshin Impact” to “Black Myth: Wukong”, the Advanced Path of Chinese Game Overseas Expansion (2025-12-24): https://news.qq.com/rain/a/20251224A04IDP00
[7] Cnblogs - 2024-2026 In-depth Research Report on China’s Advertising Media Market (Video Accounts, Omnichannel Operation and AI-Driven Ad Upgrade) (2024): https://www.cnblogs.com/wintersun/p/19413802
[8] LinkedIn - BLAST Partners with Supercell for Brawl Stars Esports (Cooperation and Esports Ecosystem Example) (2025): https://www.linkedin.com/posts/russell-schneider-8a359719_brawlstars-esports-brandsponsorships-activity-7404942647976542209-JjvL
(The above links and views are from public networks and broker APIs, and do not constitute investment advice.)