Tencent Holdings (00700.HK) Investment Value Assessment

Tencent Holdings’ current share price is

, with a market capitalization of approximately (about USD 700 billion), , , , and [0].

• The report’s statement “20-25PE is a reasonable valuation, with a market cap of approximately HKD 5.5-6.9 trillion” refers to a time range. The current valuation aligns with the 20-25x PE range; the market cap is slightly below the midpoint of the range, mainly due to the recent pullback from high levels. If it returns to the year-to-date high (around HKD 683), the corresponding market cap is about HKD 6.2 trillion; to approach the upper end of the range (around HKD 6.9 trillion), stronger valuation expansion drivers (both earnings and valuation growth) are needed.

• From early 2024 to end of 2025
  : The range gain is approximately
  +99.83%
  (opening around HKD 300 → latest around HKD 599), reflecting strong recovery and valuation repair[0].
• YTD 2025
  : Approximately
  +43.87%
  ; 1-year dimension: around
  +42.84%
  ; 3-year dimension: around
  +87.99%
  [0].
• Short-term (3 months)
  : Approximately
  -9.32%
  , indicating high-level volatility and consolidation[0].

• Trend judgment:
  Sideways (SIDEWAYS)
  ; current
  support level around HKD 593.73
  ,
  resistance level around HKD 606.83
  ; MACD is bullish, KDJ is weak, RSI is in the normal range[0].
• Key moving averages: 20-day MA around 606.83, 50-day MA around 622.01, 200-day MA around 563.16; pressure above short-term MAs, need to watch for volume breakthrough[0].

Based on the Discounted Cash Flow (DCF) model:

• Conservative scenario
  : Fair value around
  HKD 500.48
  (-16.4%)[0]
• Neutral scenario (benchmark)
  : Fair value around
  HKD 635.83
  (+6.2%)[0]
• Optimistic scenario
  : Fair value around
  HKD 994.71
  (+66.2%)[0]

• Revenue growth (neutral)
  : Based on a
  5-year CAGR of around 8.2%
  , the neutral scenario uses an
  8.2%
  growth assumption[0].
• Profit margin
  : Historical EBITDA margin around
  41.4%
  ; assuming the margin remains stable or slightly improves in the neutral scenario[0].
• Cost of capital
  : WACC around
  10.0%
  , Beta around 0.85, stable capital structure[0].
• Terminal growth
  : Neutral assumption of
  2.5%
  , consistent with the long-term stable growth range[0].

From the current

perspective:

• There is approximately
  6.2%
  upside potential relative to the DCF neutral scenario;
• Probability-weighted value is around
  HKD 710.34
  (+18.7%), indicating a neutral to positive risk-reward ratio[0].

• Domestic
  : Regulatory environment improved, game version numbers resumed normal issuance; Tencent’s top IPs continue to be updated and operated long-term, with room to increase ARPU for existing users. Short-term revenue growth is expected to recover moderately.
• International
  : Overseas expansion and M&A integration bring incremental growth; international game revenue grows faster than domestic; R&D and operation integration capabilities continue to be strengthened.
• Long-term highlights
  : E-sports ecosystem, cloud gaming, and social+gaming synergy to increase user lifetime value.

• Video Accounts
  : Content ecosystem continues to enrich; ad load rate and conversion efficiency improve; commercialization still has large room; integration with e-commerce and live streaming enhances user stickiness.
• Mini Programs
  : Cover multiple scenarios such as life services, retail, and government affairs; form a closed loop with payments and advertising; increase user usage time and transaction frequency.
• Advertising and Payments
  : AI-driven precise delivery improves ad ROI; payment penetration and scenario expansion strengthen the core foundation of fintech revenue.

• AI Empowerment
  : Improve efficiency and reduce costs in content understanding, ad recommendation, customer service, game AI (NPC, testing), etc.;
• Enterprise Services
  : Cloud and SaaS solutions (especially government and enterprise digitalization) bring a second growth curve; growth rate and structure continue to optimize.

• Stable Cash Flow
  : Abundant free cash flow; high matching degree between capital expenditure and depreciation; prudent accounting, laying the foundation for continuous dividends and buybacks[0].
• Debt Servicing and Liquidity
  : Current ratio around 1.36; debt risk is in the
  low-risk
  range[0].
• Profit Quality
  : Net profit margin near 30%, ROE over 20%; profit quality and shareholder return ability are outstanding[0].

1. Macroeconomy and Consumer Demand
   : Macro weakness may suppress advertising and payment-related revenue.
2. Regulation and Policy
   : Fluctuations in regulatory policies for gaming, fintech, and data may affect business rhythm.
3. Exchange Rate Fluctuations
   : Fluctuations in the exchange rates of HKD against RMB and USD may affect financial statements and valuation.
4. Market Competition
   : Competition intensifies in short video, gaming, and cloud service sectors; continuous product and ecosystem innovation is needed.

• Valuation Matching
  : Current around 24x P/E is in the reasonable range, consistent with the report’s 20-25x; market cap is slightly lower than the report’s HKD5.5-6.9 trillion range, which is a cost-effective window after high-level volatility.
• Growth Logic
  : Gaming (domestic recovery + international expansion) and WeChat ecosystem (Video Accounts + Mini Programs + Advertising/Payments) have medium-term visibility; AI and cloud services provide long-term support.
• Risk-Reward
  : DCF neutral scenario has around
  +6.2%
  space; probability-weighted value is around
  +18.7%
  ; technical side is range-bound; phased position building and band operation are advisable.

• Conservative Type
  : Phased layout near current price; hold for 1-2 years with the goal of profit realization and valuation repair.
• Aggressive Type
  : Increase allocation in support area (around HKD594) on pullbacks; moderately add positions after breaking resistance (around HKD607) with volume.
• Profit Taking and Risk Control
  : If key support is broken due to macro or policy shocks, dynamically evaluate fundamentals and positions.

The above chart shows Tencent Holdings’ 2025 price trend, trading volume, RSI, MACD, and other technical indicators:

• Price and Moving Averages
  : Blue line is closing price; MA20/MA50/MA200 show short/medium/long-term trends in sequence; gray band is Bollinger Bands, used to measure volatility range.
• Trading Volume
  : Bar color reflects daily rise (green) or fall (red), used to judge price-volume coordination.
• RSI
  : Purple line is Relative Strength Index, between 70 (overbought) /30 (oversold) reference lines.
• MACD
  : Reflects momentum changes; bar chart is the difference between MACD and signal line, used to assist in judging trend reversals.
  Data source: Broker API, covering from 2025-01-01 to 2025-12-30.

[0] Jinling API Data