Tencent, which is in the “shift”, has continued to bear pressure on its performance.
On May 18, Tencent released its first quarterly report. In the first quarter of this year, its revenue was 135.5 billion yuan, flat year-on-year. According to non international accounting standards, its net profit was 25.55 billion yuan, down 23% year-on-year, falling for three consecutive quarters.
from the business segment, the “value-added services” business remained unchanged from the same period last year, while the “online advertising” business decreased by 18% year-on-year, and the business revenue of “financial technology and enterprise services” increased by 10% year-on-year to 42.8 billion yuan. This part of revenue has become the engine of Tencent’s steady growth and a bright spot in the financial report
In terms of user data, by the end of the first quarter of 2022, the number of combined monthly live accounts of wechat and wechat was 1.288 billion, a year-on-year increase of 3.8%, and the number of monthly live accounts of QQ mobile terminal was 563 million, a year-on-year decrease of 7%; The number of Tencent charging value-added service accounts was 239 million, a year-on-year increase of 5.9%.
It is worth mentioning that during the performance pain period, Tencent accelerated the integration of data and real estate, increased R & D investment, and upgraded from the pursuit of large-scale growth to the pursuit of high-quality growth. In the first quarter, Tencent’s R & D expenditure reached 15.38 billion yuan, a year-on-year increase of 36%, constantly consolidating the technical base of serving the real economy.
Ma Huateng, chairman and CEO of Tencent, said that in the face of industry challenges, the company has implemented cost control measures and adjusted some non core businesses, which will help to achieve a more optimized cost structure in the future. Looking forward to the future, the company will focus on key businesses under various challenges and periodic changes, adhere to innovation, and continue to create value for users, partners and the whole society.
At the teleconference after the financial report, Tencent executives said that they would take more balanced measures for investment. Previously, the adjustment of Jingdong shares held was a very important measure. For another company, Tencent also adopted the way of reducing its holdings and repurchased with the benefits brought by the reduction. Tencent’s investment strategy is still effective. In the future, it will analyze more macro risks and follow up the latest trends at any time. “We will pay attention to risks and effectively manage risks. We will further make reasonable investment and consider reducing holdings, which will also bring better cash flow to the company.”
in addition, for the game sector with more market concern, Tencent executives said that the approval status of the game version number is good at present, and more positive signs will be shown in the future. Regulatory factors will promote the further development of the game industry
first quarter results lower than external expectations
Under the epidemic, Tencent’s performance is also under great pressure, lower than external expectations.
According to the data, the revenue in the first quarter was 135.5 billion yuan, a year-on-year increase of almost zero. According to non international accounting standards, the net profit was 25.55 billion yuan, a year-on-year decrease of 23%. In terms of the profit attributable to the equity holders of Tencent, the decline was even greater, realizing a net profit of 23.4 billion yuan, a year-on-year decrease of 51%, which was directly “halved”.
Then compare the prediction data of securities companies on Tencent’s first quarterly report:
Citic Securities Company Limited(600030) : Tencent’s short-term performance is under pressure and does not change its core value. It is predicted that the company’s revenue in the first quarter will be 142.7 billion yuan (a year-on-year increase of 5.5%), and the net profit of non IFRS will be 26.8 billion yuan (a year-on-year decrease of 19%).
Guosen Securities Co.Ltd(002736) : Tencent is expected to achieve revenue of 140.5 billion yuan in the first quarter, with a year-on-year increase of 3.8%, and the net profit under non IFRS decreased by 17.5% to 27.3 billion yuan.
China International Capital Corporation Limited(601995) : it is predicted that Tencent’s revenue in the first quarter will be basically flat to 135.9 billion yuan year-on-year, and its adjusted net profit will decline by 17% year-on-year to 27.3 billion yuan.
China Merchants Securities Co.Ltd(600999) : it is expected that Tencent’s revenue in the first quarter of 2022 is expected to reach 138584 billion yuan, and its adjusted net profit is expected to reach 28.133 billion yuan.
Shenwan Hongyuan Group Co.Ltd(000166) (Hong Kong) Tencent holdings is expected to achieve revenue of 14 billion yuan in the first quarter, an increase of 4% year-on-year, and net profit of 28.2 billion yuan, a decrease of 15% year-on-year.
It can be said that compared with the expectations of these head securities companies, Tencent’s revenue or net profit are lower than external expectations. Tencent also explained the decline in net profit in its financial report that the overall rise in costs and expenses was faster than income, and the net contribution made by associates was caused by the change from profit to loss.
digital real economy becomes a new engine
Looking at the specific business situation, the advertising revenue has declined significantly, the growth of game revenue is weak, and the financial technology and enterprise service business have achieved rapid growth, which has become a new support for performance.
In terms of business, the revenue of value-added services, including games and videos, was 72.74 billion yuan, accounting for 54% of the total revenue; The revenue of online advertising is 17.99 billion yuan, accounting for 13%, and that of financial technology and enterprise services is 42.77 billion yuan, accounting for 32%.
The specific business lines are as follows:
Chinese Games: revenue of 33 billion yuan, a year-on-year increase of 1%
Overseas Games: the revenue was 10.6 billion yuan, a year-on-year increase of 4%
Social networks: revenue was 29.1 billion yuan, an increase of 1% year-on-year
Social advertising: revenue of 15.7 billion yuan, down 15% year-on-year
Media advertising: revenue of 2.3 billion yuan, down 30% year-on-year
financial technology and enterprise services: revenue of 42.8 billion yuan, an increase of 10% year-on-year
It is understood that since Tencent’s “930 reform” in 2018, the continuous deep cultivation of the industrial Internet is showing results: the revenue share of the financial technology and enterprise service sector increased from 25.5% in the first quarter of 2019 to 32% disclosed in the first quarter, which not only improved the overall revenue health, but also contributed a new engine of high-quality development to Tencent.
The financial report explained that although affected by the epidemic, the transaction amount of commercial payment and enterprise service revenue decreased in March this year, Tencent took certain cost control measures, including repositioning its IAAs service, from simply pursuing revenue growth to achieving healthy growth, and took the initiative to reduce loss making contracts.
In terms of games, in the first quarter, Tencent’s game revenue in the local market decreased by 1% to 33 billion yuan. Among them, the revenue growth of recently launched games such as “hero League mobile game” and “golden shovel battle” was mostly offset by the decline of game revenue such as “Tianya Mingyue swordsman game” and “call of duty mobile game”.
in the international market, Tencent’s game revenue increased by 4% to 10.6 billion yuan, of which the revenue of games such as valorant and tribal conflict increased, but the revenue of pubg mobile decreased. Tencent explained that during the epidemic prevention and control period, the game industry is still in a downward trend
In value-added service business, social network revenue increased by 1% to 29.1 billion yuan, reflecting the increase in the revenue of video number live broadcasting service, but most of it was offset by the decrease in the revenue of music live broadcasting and game live broadcasting.
Meanwhile, the revenue of online advertising business in the first quarter decreased by 18% year-on-year to 18 billion yuan. Tencent explained that this is due to the weak advertising demand in education, Internet services, e-commerce and other industries, as well as the impact of regulatory changes in the online advertising industry itself, but the advertising expenditure of the FMCG industry is still stable.
Among them, social and other advertising revenue decreased by 15% to 15.7 billion yuan, mainly due to the impact of the regulation and supervision of the advertising business of Tencent mobile advertising alliance, the revenue decreased significantly, and the media advertising revenue decreased by 30% to 2.3 billion yuan.
increase R & D investment
It is worth noting that Tencent increased its R & D investment in this quarter. Tencent’s R & D investment reached 15.38 billion yuan in the first quarter of 2022, a year-on-year increase of 3.62%.
Tencent believes that the core competitiveness of science and technology enterprises is products and technology. Although in the transition period, the investment in R & D is still increasing, and the bottom capacity of service entities is constantly improved. In addition, the R & D investment in the first quarter of 2022 was 15.38 billion yuan. Since 2019, the cumulative investment in R & D has reached 136.5 billion yuan
At present, Tencent has established a complete self-research system including servers, operating systems, chips and SaaS, providing a solid technical base for serving the real economy.
As of April 2022, Tencent has disclosed more than 56000 patent applications in major countries and regions around the world, with more than 26000 patents authorized, of which invention patents account for more than 90%.
recently, Ma Huateng admitted in Tencent’s sustainable social value report that Tencent is facing a new stage of challenges and development: on the one hand, the growth rate of revenue and profit slows down; On the other hand, Tencent also believes that it can take this shift to create higher quality development
Tencent said in the financial report, “looking forward to the future, we will focus on key businesses under various challenges and periodic changes, adhere to innovation, and continue to create value for users, partners and the whole society.”
