Is Tencent's valuation once again approaching the decade-low bottom?

Tencent: Key valuation lows over the past decade occurred atOctober 2022, December 2023, and January 2025, all driven by substantial negative factors, with its Non-IFRS PE ratio falling to12-13 timesrange. The most recent significant pullback occurred inMarch 2026, with valuations briefly touching13.5 times(based on projected 2026 earnings), nearing historical extremes.

Tencent's valuation trough is typically associated with major negative events, as the market assigns an extremely low price to its future profit growth amid pessimistic sentiment.

Late October 2022 the liquidity crisis in Hong Kong stocks, intensified internet regulation, and external environment shocks 12 to 13 times The historically lowest valuation was around 12 times. During this period, substantial negative factors occurred, causing the valuation to drop below 15 times. Late December 2023 The gaming industry released the 'Draft Consultation Paper on Online Game Management Regulations' Below 15 times Due to concerns over new gaming regulations, the valuation fell below 15 times again.

Early January 2025 Listed by the US Department of Defense as a 'Chinese military company' Below 15 times Due to foreign capital compliance-related sell-offs, the valuation dropped below 15 times for the third time.

March 2026 The beta of Hong Kong stock technology sector is declining, raising concerns that AI investment may erode profits Approximately 13.5 times Market cap corresponds to about 14.5 times PE based on 2026 projected earnings, with the previous low falling to13.5 times, leaving only about 13% room from the historical extreme of 12 times

Early lows (2022-2025) were driven bypolicy regulationandGeopolitical factorsand other external shocks. Recent lows (2026) have been compounded byweak industry beta(liquidity in Hong Kong stocks) andIts own narrative has been impaired(AI investment is massive but short-term results are not yet visible) under dual pressures.

Using the March 2026 low (13.5x PE) as a reference, Tencent's valuation is already in the historically bottom range. The market’s expectation for its compound annual growth rate (CAGR) of profits from 2026 to 2028 remains around 11%, combined with an annual dividend and share repurchase yield of 3-4%. This valuation level offers a relatively high margin of safety. $TENCENT (00700.HK)$

(Content partially referenced from AceCamp Q&A)

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