Seeking Alpha·2024-03-24 16:09Core Insights - Tencent reported Q4 and FY 2023 results with a 7% YoY revenue growth, totaling RMB 155.2 billion, slightly below analyst expectations of RMB 157.4 billion [3][4] - The company achieved a significant 23% YoY increase in profits, with non-GAAP net income reaching RMB 42.7 billion, a 44% increase compared to Q4 2022 [3][4] - Tencent announced a $12.8 billion stock buyback program for 2024, doubling from 2023, and a 40% increase in dividend payments, indicating a shift towards enhancing shareholder distributions [5][12] Financial Performance - Q4 2023 revenue was RMB 155.2 billion, reflecting a 7% increase YoY, while FY 2023 revenue reached RMB 609.0 billion, up 10% YoY [4] - Gross profit for Q4 surged 25% YoY to RMB 77.6 billion, with an operating income margin of 31.7%, up 660 basis points YoY [3][4] - The company’s total gross cash amounted to USD 57 billion, with a strong free cash flow of USD 24 billion [6] Shareholder Distributions - Tencent plans to increase its stock repurchase program to a minimum of $12.8 billion in 2024, alongside a 40% increase in annual dividends, potentially distributing close to $4.1 billion [5][12] - The anticipated total distribution to shareholders could reach $16.9 billion in 2024, resulting in an equity yield of around 5% based on a market capitalization of $339 billion [5][12] Valuation and Recommendations - The intrinsic value of Tencent is estimated at approximately $49 per share, reflecting a notable upside of about 33% compared to its trading price as of late March 2024 [9][12] - The cost of equity estimate has been reduced by 150 basis points to 10.5%, while the EPS projections for FY 2023 and 2024 have been adjusted to $2.8 and $3.24, respectively [8][9] - The stock has been upgraded to a "Buy" recommendation based on the improved shareholder distributions and updated valuation metrics [12]