Comments on this sanction incident: This incident has no fundamental impact on the business, and Tencent actively responded to initiate reconsideration. Xiaomi was included in the military-related blacklist in January 21, but the restrictions were lifted in May of the same year through lawsuits and challenges. This case shows that through legal channels, it is possible for Chinese enterprises to successfully challenge and revoke the unreasonable sanctions imposed by the US government. Even if the sanctions take effect, the same as beforeChina MobileCompared with other companies being blacklisted by the United States, Tencent has a higher proportion of free-floating shares, accounting for about 61% of the total share capital. According to Bloomberg statistics, Tencent currently holds about 11% of the shares of US-funded institutions, including asset management companies Pioneer Pilot,BlackRock, capital group, mainly throughIndex fundsHolds shares in Tencent. If U.S. investors choose to sell these shares, it also provides opportunities for domestic investors. Tencent as the core of ChinaAssets, the foreign sell-off may accelerate itsOwnership StructureOptimization. Therefore, although U.S. sanctions are aimed at suppressing leading Chinese companies, in the long run, they may help Chinese companies regain pricing power and strengthen market dominance.
Diversified business layout, U.S.-related international business accounts for a relatively low proportion: Tencent's overall revenue in Q3 2024 will be 167.2 billion yuan. The revenue ratio of each business segment is: 49% for value-added services, 18% for advertising, and 32% for financial technology and enterprise services. Among them, the revenue related to international business is mainly US-funded game companies invested by Tencent, accounting for about 5% of the revenue related to the United States. Tencent can change investment entities without having a long-term impact on the business itself. Tencent Holdings has demonstrated its adaptability and growth potential in different market environments through its diversified business layout, especially its strong performance in the fields of games, advertising and financial technology.
Pan-entertainment business has grown steadily, and IP integration and cultural output have been quite effective: Tencent's pan-entertainment business has maintained steady growth in recent years. Following the leading edge of the game sector, it has led animation, online literature, film and television, e-sports and music sectors in IP integration and cultural output. Remarkable results have been achieved. Through Tencent video andReading GroupWith the deep integration of Tencent, Tencent has realized the full chain layout from content creation, evergreen IP incubation to diversified development. In terms of going overseas, China Literature has spread massive online articles to more than 180 countries and regions through AI empowerment, and video content has also passed andNetflix、DisneyThe cooperation is popular in Japan, Europe and other regions.
Target price is HK $540, buy rating: Comprehensive analysis, we consider that the improvement in the profit margins of the company's various businesses will not be fundamentally affected by the risk of sanctions, diversified business layout and pan-entertainment content will strengthen market competitiveness, and it is expected that its core business will maintain a steady growth trend; The revenue and operating profit forecast uses the forecast data of 2025, and the target price is calculated to be HK $540, which is 42% higher than the previous closing price. The buy rating is maintained.
