As Tencent Reignites Growth Engines, Rapid Recovery in Sight; HKD 704 FVE Kept, Shares Undervalued

We maintain our HKD 704 fair value estimate of wide-moat Tencent following its earnings report for the fourth quarter of 2022. While the results were in line with Refinitiv consensus expectations, management's comments during the earnings call suggest the firm is now pivoting from cost-cutting to fostering growth. With Tencent reigniting growth engines, we fine-tune our near-term forecasts for the firm but keep longer-term assumptions unchanged. We continue to view Tencent shares as undervalued, trading at a 50% discount to our fair value estimate. We believe that the market underestimates the longer-term revenue contribution from video accounts and the potential for margin expansion as Tencent cements a more efficient cost structure.