Market (what, how and where Tencent sells)
Business (how much Tencent earn)
Catalysts. How Tencent make more money in the next 5 years
- WeixinVideo Accounts, Mini Games and Weixin Search enhance user value by creating seamless connections with products, services and content while presenting exciting revenue opportunities.Generating high margin revenue streams from own traffic, with platform costs already paid for.
- GamesBrewing Future Growth via Revival of Top Two Games and Emerging FranchisesInvesting to expand into content-driven and casual games
- FintechWeTechnology Limited ("WeBank Technology Services") is established on June 25, 2024, in Hong Kong with a registered capital of USD 150 million.WeBank Technology Services ("the Company") is a wholly-owned subsidiary of WeBank. With WeBank's leading technological pedigree, the Hong Kong-based Company shall dedicate and commit to providing digital financial and infrastructural solutions to clients worldwide.
- SaaSIntegration with Tencent Meeting and Tencent Docs empowers WeCom as the core platform for enhanced collaboration and productivity Deepening connection with Weixin enables differentiated CRM functions in WeCom
- AISignificant Boost to Advertising Business: Leveraged Tencent Hunyuan，to facilitate tagging and categorisation of content and ad materials.Expanding Cloud Services Solutions: Tencent Hunyuan is accessible via APIs for functions such as coding, data analysis and customer service automationIntegration of AI in SaaS Products: Empowered Tencent Meeting and Tencent Docs for real-time meeting content interpretation and document creationEnhancing Content Production Efficiency: GenAI increasingly facilitating the creation of highquality game contents, such as S+ level skin special effects for Honour of KingsYuanbao AI Assistant: can be used for document analysis and summarisation, and gen-AI search leveraging Tencent’s content ecosystem, including Weixin Video Accounts, Official Accounts, and TME.
- Global Investments and Partnerships: Tencent’s strategic investments in international companies such as Tesla, Spotify, and Snap Inc. not only diversify its portfolio but also pave the way for global collaborations. These relationships can facilitate technology sharing and entry into new markets.
Risks
- 25.01.06 U.S. Adds Tencent to Chinese Military Companies Blacklist
This should not affect the bulk of the business, as revenue from outside China represents 9%, (video games). The market has responded by correcting the share price by 10%.
The company has not made official statements but in previous attacks it has solved the situation well
- CompetitorAlibaba, Baidu, 360, ByteDance and Huawei.Startups, including some unicorns (with valuations in excess of $1 billion), worth watching include Moonshot AI, Minimax AI, ZhiPu AI, Baichuan AI, 01.AI and Modelbest
- AI legal framework in ChinaIn May 2024, the National Information Security Standardization Technical Committee (NISSTC) published a new draft regulation titled Cybersecurity Technology – Basic Security Requirements for Generative Artificial Intelligence (AI) Service. It encompasses the protection of AI models, the security of training data, and the implementation of general security protocols. It provides guidance for security assessments and regulatory setting for both service providers and regulators
Valuation
- I assume that innovations in AI will improve the efficiency of all business segments, allowing despite competition to maintain a CAGR 14% the next 5 years
- The margin will drop to 22%, due to competition and marketing expenses
- Risk level 9% due to the geopolitical situation.
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Disclaimer
The user kapirey has a position in SEHK:700. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
