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Tencent Music Entertainment Group (TME) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Tencent Music Entertainment Group (TME)

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Intrinsic Value (DCF)

Current$16.60
→
Intrinsic$132.03
+695%
$91.61$132.03$208.83
Market implies 1% growth for 5 years
DCF analysis suggests TME could have 695% upside at 12% growth — verify assumptions match your view.
At $17, the market prices in only 1% growth — below historical 12%, suggesting low expectations.
Range: Bear $92 → Bull $209. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →8%10%12%14%
8%$157$171$185$201
10%$113$122$132$143
12%$88$95$103$111
14%$73$78$84$90

Bull Case

  • Bull case ($209) offers 1158% upside at 15% growth, 9% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (1%) ≤ historical CAGR (12%)

Bear Case

  • Bear case ($92) with 10% growth, 12% discount rate
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5-Year Free Cash Flow Projection

Year 1$10.37B
Year 2$11.64B
Year 3$13.07B
Year 4$14.67B
Year 5$16.47B
Terminal$242.29B

📐 Model Inputs

Growth Rate12.2%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$9.24BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is TME stock undervalued or overvalued?
🟢 UNDERVALUED

TME trades at $16.60 vs. our DCF-derived intrinsic value of $132.03, implying +300% upside. At a 10.0% WACC and 12.2% projected FCF growth, the market appears to be underpricing the present value of TME's future cash flows. The bear case ($93.54) still suggests upside, providing margin of safety.

What is TME's intrinsic value?

Using a 5-year DCF model: Base FCF of $9.24B, projected at 12.2% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $-7.11B net debt and dividing by 1.57B shares: Bear $93.54 | Base $132.03 | Bull $185.45. Current price $16.60 implies +300% to base case.

How is TME's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 12.2% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($199.56B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 21.6x.