Tencent Q1 financial report interpretation: the first disclosure of financial technology and enterprise services, the former cash cow game situation turned better


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Tencent, which experienced the organization's "post-earthquake" reconstruction and announced its move to the industrial Internet, disclosed the first quarterly earnings report for 2019 and handed over the first transcript since the beginning of the year.

According to financial data, Tencent (00700.HK) revenue of 85.465 billion yuan up 16% from the same period last year. Net profit under non-general accounting standards was 20.93 billion yuan, up 14 percent from a year earlier, surpassing the 20.388 billion yuan net profit previously estimated by 16 investment bank analysts. By the time of release, Tencent rose 0.92 percent to close at HK $37 4, with a total market value of about HK $3.5 trillion.

In the Q1 financial report, Tencent performed well in the financial technology and corporate services, social advertising business. The earnings report clearly stated that “revenue increased by 16% year-on-year, mainly driven by commercial payment services and other financial technology services, social advertising and digital content services.”

It is worth noting that since the beginning of this quarter, Tencent has begun to separately disclose financial technology and enterprise services as part of its financial report. The business grew rapidly in Q1, up 44% year-on-year to RMB 21.789 billion.

The social advertising revenue increased by 34% year-on-year to RMB 9.9 billion. It can be seen that the commercialization of Tencent's social traffic is continuing to release dividends.

The former cash cow business - the game has also begun to rejuvenate. Ma Huateng said, "The reason for the rejuvenation of the game is that new games such as "Perfect World Mobile Games" are popular in China and "PUBG MOBILE" continues to grow in the international market." At the same time, the game version approval channel is again Open, also let Tencent breathe a sigh of relief in the game business.

Overall, new business finance technologies and corporate services are rapidly emerging, social advertising is better released, and the former pillar game business has revived.

The first disclosure of financial technology and enterprise services is expected to become the pillar of the new economy

Revenue from Tencent's financial technology and corporate services rose 44 per cent in the first quarter from a year earlier to 21.789 billion yuan, driven by commercial payments, other financial technology services such as microfinance and cloud operations.

This is the first time Tencent has split financial technology and corporate services. Previously, financial technology and cloud services belonged to the “other” category in the earnings report. In the 2018 annual report, Tencent once pointed out that “other businesses recorded an 80% year-on-year increase in revenue in 2018” and disclosed that in 2018, Tencent’s cloud service revenue exceeded 100% to 9.1 billion.

Since 2018, the sector has grown rapidly, and this split also justifies Tencent's emphasis on financial technology and enterprise services.

Tencent explained in the financial report that the reasons for the scale of financial technology and enterprise services can include: the increase in related demand brought by enterprises seeking “industry Internet opportunities”; the synergy between social platforms and peer-to-peer payment services; small programs and enterprise WeChat There are synergies between services and so on.

Since 2018, the Internet has become a new vision for Internet giants including Tencent. At the Digital China Construction Summit on May 8, Ma Huateng also talked about Tencent's role in the industry Internet - becoming a "digital assistant."

"China's traditional industrial system, which has a complete range of categories and is rich in variety, has the most advantages in opening up the intelligent connection from consumption to production (that is, C2B) with the help of digital technology, so as to create diverse, personalized, and high-quality 'domestic goods'. To help supply-side structural reform. " Ma Huateng said:

"Tencent hopes to play the role of 'digital assistant' in this process, exploring the industrial Internet with various industries and building digital ecology together."

On the payment side, Tencent disclosed as early as its 2018 annual report that by the end of 2018, Tencent's wealth management platform, LiCaiTong, had helped manage more than 600 billion yuan in customer assets. Launched by WeBank, the loan balance of WeiLiDai, a product that provides small loans to consumers, has grown rapidly, and the loan business has also extended to enterprises, serving small and micro enterprises through "micro loans."

In the past, the "cash cow" recovered, and the situation of the game business improved.

Games were once Tencent's growth engine, but under the influence of regulation and policy, games accounted for a gradual decline in Tencent's total revenue, but it is still an important source of revenue for Tencent.

In this quarter's earnings report, online game revenue was RMB 28.513 billion, which was generally stable compared to the first quarter of 2018. Smartphone game revenue was 212 yuan, down 2% year-on-year and 11% quarter-on-quarter. Personal computer client game revenue was RMB 13.8 billion, down 2% year-on-year and 24% quarter-on-quarter.

Compared with 2018 Q1 Tencent games are still in peak condition, 2019 Q1 mobile games and PC games are down from the same period last year, but compared with 2018 Q4 game business dilemma, the situation has begun to improve this quarter.

In terms of mobile games, the content update of "Glory of the King" has increased the user activity and the number of paid users. "Perfect World Mobile Games" was released in March 2019. After the launch, it increased the total number of daily active accounts of Tencent's role-playing game portfolio, and brought a lot of water revenue in the first quarter. “But most of the running water revenue will be deferred until later in the period to be recognized as income, so the game has limited contribution to the quarterly revenue.”

According to App Annie's data, "PUBG MOBILE" has more than 100 million monthly active accounts in the international market (excluding mainland China) since February. Tencent released the new Royale Pass in March, which also drove the game. Income growth.

In 2019, Tencent released the tactical competitive game Game for Peace, as well as a number of moderate to severe games. For the user activity, payment rates and income have a lot of contributions.

Guosen Securities once pointed out that Tencent's "Peace Elite" is expected to catalyze the game sector. The game industry is expected to resume higher growth rate in the context of the renewed version.

Since the game version was approved in December last year, the game maker represented by Tencent has been watching the wind, but the first three batches have not been a big factory. Until the fourth batch of game editions was approved on January 24th, Tencent won the two traditional Chinese-style games with "Folding Fans" and "榫 卯 卯".

In the commercial realization of social traffic, social advertising continues to stir up the beam. It has become the second largest new pillar after financial science and technology and enterprise.

Revenue from the online advertising business rose 25 per cent from a year earlier to 13.377 billion yuan, according to the results. Media advertising revenue rose 5 per cent to 3.479 billion yuan, mainly reflecting the increase in the contribution of advertising in Tencent news services. Revenue from social and other advertising rose 34 per cent to 9.898 billion yuan. It accounts for more than 70% of the overall advertising revenue.

In the 2018 financial report, Tencent affirmed the important role of social advertising in driving Tencent's revenue. "By adding a second ad slot in the circle of friends, and starting to increase the number of ad slots in the small program, increased advertising resources", and increased the commercialization capabilities of WeChat.

In the organizational restructuring of Tencent last year, Tencent integrated a new advertising marketing service line. Merge the original social and effect advertising department (TSA), which was scattered in Corporate Development Group (CDG), with the original Online Media Group (OMG) advertising line. The merger is described as a more collaborative combination of social, video, information and other rich media resources to give full play to Tencent's resource characteristics and advantages to create greater value for customers.

On May 9 this year, Tencent Advertising organized the first press conference after structural adjustment, "Tencent Smart Marketing Summit," and launched the "Tencent Smart Marketing Tencent In" system, which will be the real economy. Internet native customers and medium and long tail customers provide advertising solutions.

And this will also be Tencent advertising's next revenue direction.

Although online advertising revenue growth has slowed compared with previous years, Tencent said "it will continue to steadily develop its advertising business, focusing on optimizing advertisers' returns, rather than focusing on expanding short-term revenue."

The current Tencent is no longer relying solely on "game + social", but on the premise of solidifying the existing pillars, continue to explore new students, and can support Tencent's next 20 years of business. Only in this way can Tencent take a new fast track in the current loss of the Internet dividend. (This article is the first titanium media, author / Lu Yi, editor / Zhao Yuhang)

Tencent Q1 earnings interpretation first time disclosure finance technology and enterprise services old days cash cows games situation good turn

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