Rate Of ReturnTencent's Q4 2024 earnings report interpretation—the steady leader of Hong Kong stocks
Today$TENCENT(00700.HK) released its Q4 2024 financial report. One word sums it up: "Steady"! Revenue reached RMB 172.45 billion, up 11.1% YoY, while adjusted net profit surged 29.6% YoY to RMB 55.31 billion. Adjusted net profit has now grown over 29% YoY for seven consecutive quarters. By segment: gaming revenue grew 20.3%, advertising rose 17.5%, social networks increased 5.7%, and fintech advanced 3.2%.
I. Personal Summary
1. The financials are indeed rock-solid, comparable to Apple in the U.S. (though with higher growth). Q4 revenue broke double-digit growth, while efficiency gains kept profit margins expanding at 30%+—exceptional among Chinese tech giants.
2. Tencent's fundamentals are transparent: no longer a high-growth stock but arguably Hong Kong's most reliable blue-chip. It's a wealth-creator for most investors—a classic high-probability, low-risk opportunity (unless bought at peaks).
3. Core strengths: WeChat dominates social networks, gaming leads the market, ads print money, and ToB services (including RMB 50B/quarter cloud) scale up. Video Accounts flourish. While Tencent's Yuanbao AI model lags peers, its application-layer prowess mitigates concerns—unlike Baidu's inefficiency despite heavy AI boasts.
4. Tencent's aggressive buybacks (RMB 100B in 2024, targeting RMB 80B this year) and dividends (+32% payout) contrast sharply with Alibaba's "shareholders-third" approach. With 2.7B shares retired last year, this aligns perfectly with Buffett's criteria: wonderful business, stellar management.
5. My strategy: After maxing out equity positions, I've consistently sold puts (strikes at 300/280/260 HKD). Most expired worthless, but assigned shares now yield 50% unrealized gains—with the bulk of profits coming from options premiums.
6. Two years of Naspers' overhang and HK market woes created golden entry points. Since 2022's historic HK$200 trough (which I called the bottom), sub-300 Tencent was a steal. My portfolio is 90% Tencent/Xiaomi—selling countless sub-400 puts. Now with the rally, those cheap options are gone, but harvest season arrives.
Tencent's simplicity needs little elaboration—see my past analyses linked below for details. Here's the data snapshot:
II. Key Financials
1.Revenue: Q4 hit a record RMB 172.49B (+11% YoY)—impressive for Tencent's scale.
2.Profit: Adjusted net profit RMB 55.31B (+29.6% YoY), marking seven straight quarters of >29% growth—outpacing revenue through efficiency.
III. Gaming
Q4 gaming revenue: RMB 49.2B (+20.3%). International games rose 15% to RMB 16B; domestic surged 23% to RMB 33.2B.
IV. Social Networks
Social networks: RMB 29.8B (+5.7%). With WeChat MAU plateauing, Video Accounts and Mini Programs must drive future growth.
V. Advertising
Ads: RMB 35B (+17.5%), the fastest-growing segment. Fueled by Video Accounts/Mini Programs demand and AI-driven targeting. WeChat's ad load remains tastefully restrained—no spam, low frequency.
VI. FinTech & Business Services
FinTech & ToB: RMB 56.13B (+3.2%). Though slow-growing, its high margins likely offset cloud losses—bundling avoids Ant-like regulatory scrutiny.
Past Tencent reports:
Tencent Q3 2024: Steady as She Goes—Time to Sell Options
Tencent Q2 2024: HK's Steadiest "Big Brother"
Tencent Q1 2024: All Set for Value Recognition
Tencent Q4 2023: Flat Earnings, Bold Buybacks—No Worries for HK's Top Dog
Tencent Q3 2023: Still Steady, Revenue & Profit at New Highs
Tencent Q2 2023: Double-Digit Growth, Video Accounts' Promise
Tencent Q1 2023: Recovery Mode, Back to Growth
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