As Tencent Meeting amasses sufficient meeting minutes, it can metamorphose into an internal corporate chatbot, wherein users can pose inquiries, an innovation that we anticipate will revolutionize the manner in which meetings are documented and intelligence is garnered.
Tencent Docs has swiftly garnered in excess of 200 million monthly active users, and Tencent Meeting presently boasts a user base of 400 million. We firmly believe that as additional functionalities and attributes are incorporated, Tencent will flourish into a more adhesive platform.
In recent times, Tencent convened a global digital ecosystem conference. Following the comprehensive perusal of the entire conference, our confidence in Tencent’s prospects has swelled. During the conference, Tencent accomplished three objectives by showcasing its cloud products: Firstly, Tencent Conference surpassed the 400 million user mark, thereby fortifying the network effect; secondly, it assuaged concerns regarding Tencent’s ability to seize AI opportunities; thirdly, it unveiled the profit potential of Tencent’s series of enterprise solutions in terms of monetization.
While the conference did not influence our fair valuation estimate for Tencent Holdings (HK$704, approximately US$90), it reinforced our conviction that Tencent is one of the most attractively priced entities within the Internet industry. Currently, the company remains undervalued, with shares trading at HK$302.6 as of September 20, representing a 57% discount to our fair valuation estimate.
Fintech and business services are projected to achieve a 20% growth by 2027.
In our fair valuation estimate, we posit that Tencent’s comprehensive revenue compound annual growth rate (CAGR) from 2022 to 2027 will amount to 13%, with the financial technology and business services sectors anticipated to achieve nearly 20% growth.
The rationale behind our expectation of this segment’s high growth lies in the augmented technology expenditure by enterprises, the surging popularity of cloud services, and Tencent’s endeavors to augment profitability through monetization. These factors will facilitate the relatively rapid growth of the business services division’s revenue.
At this global digital ecosystem conference, Hunyuan, a substantial AI model designed and developed by Tencent, was unveiled for the first time. The market exhibited keen interest in it. However, we opine that in addition to Hunyuan’s individual application scenarios, the salient aspect lies in its integration into Tencent’s product portfolio, which will enhance and augment user engagement.
Tencent management has furnished Hunyuan with multiple application scenarios, encompassing Tencent Meeting, Tencent Doc, and advertising content creation. We regard Tencent’s early AI tools as a commendable promotional stratagem, encompassing translation, subtitles, meeting summaries, and meeting assistants (where attendees can pose queries to an AI chatbot based on meeting transcriptions). We firmly believe that all these applications will expedite the popularity of Tencent Meetings and facilitate its gradual evolution from a free service to a paid one, thereby augmenting revenue.
As Tencent Conference accumulates a sufficient corpus of meeting records, it can evolve into an internal chatbot within the company. Users can pose queries to it, and Tencent Conference employs AI algorithms to furnish answers. Specifically, Tencent Meeting can utilize natural language processing and machine learning to analyze keywords in each meeting record, extract them, and effectively transform them into questions and answers. Consequently, the chatbot possesses the acumen to intelligently respond to inquiries based on background, prerequisites, context, and so forth. Additionally, it can generate valuable insights derived from the accumulation of data from past meetings. We contend that this will fundamentally transform the modus operandi of meeting documentation and information acquisition.
AI applications enhance Tencent’s user stickiness.
Following an exhaustive examination of Tencent Cloud Department’s relevant ToB products, we have observed the escalating potency of WeChat’s network effect, which is crucial in bolstering new avenues of growth. Tencent has adeptly addressed the “cold start problem” within its expansive user network through two distinct approaches, both of which have proven highly efficacious. Firstly, Tencent integrates software or services with WeChat, thereby empowering users to directly access these tools from within WeChat. In this model, new users can seamlessly transition to Tencent meetings and achieve seamless collaboration without the need for separate registration.
Secondly, Tencent permits users to share meeting invitations or dispatch documents via WeChat’s messaging function. It also enables users to effortlessly join meetings or edit documents with a mere “click.”
It is precisely due to these inherent advantages that Tencent Documents has rapidly amassed over 200 million monthly active users, while Tencent Meetings presently boasts a user base of 400 million. As additional functionalities and features are incorporated, we firmly believe that Tencent will evolve into a more adhesive platform, thus meriting a wide moat rating.
Although Tencent is not accustomed to disclosing minute details regarding monetization profits, management did make mention of its reserves of Nvidia chips for third-party model training lease purposes. In our assessment, Tencent’s most significant opportunity lies within enterprise toolkits, which, once integrated into mission-critical workflows, create substantial barriers to customers switching systems.