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On August 12, Tencent released its 2020 second quarter earnings report. From the data point of view, Tencent continued its good results in Q1 in the second quarter, and the impact of the epidemic is not obvious. However, due to the current escalation of conflicts in Sino-US relations and an administrative order from the White House, it cast a shadow on Penguin’s future. .
According to the financial report, the company achieved revenue of 114.883 billion yuan in the second quarter, a year-on-year increase of 29%. After 2019Q4, the revenue exceeded 100 billion yuan in the third consecutive quarter, and the growth data was a new high in the past 8 quarters; IFRS Under the profit of 32.454 billion yuan, a year-on-year increase of 31%; non-IFRS profit was 30.153 billion yuan, a year-on-year increase of 28%.
Tencent’s good overall performance in the second quarter was mainly attributable to the strong growth of its value-added services (social networking and online games) and the company’s financial technology and corporate services businesses. In the capital market, despite the impact of the US ban, the company’s share price has fallen by more than 10% in a few days, but on the day of the release of the interim report, it still stubbornly turned red, closing at HK520.5, an increase of 1.36%.
So in the second quarter, how did Tencent’s business lines perform? And what did the executive order from the White House on August 6 say? What impact will it have on the company? This article will analyze this.
How about Tencent’s revenue and profit performance in the second quarter?
In this quarter, Tencent achieved a rapid growth of about 30% in both revenue and profit, and the overall performance was quite impressive.
(Data source: company announcement)
In 2020Q2, Tencent achieved total operating revenue of 114.883 billion yuan, a year-on-year increase of 29%, a record high in the past eight quarters, and its growth has continued to increase since 2019Q1, and it has long since gone out of the end of 2018 to early 2019 due to changes in game approval policies. downside. The good performance of the company this quarter was mainly driven by value-added services (social networking + online games), corporate financial services and enterprise technology, and achieved relatively good growth data.
(Data source: company announcement)
In the same period, Tencent achieved a profit of 32.454 billion yuan for the period, a year-on-year increase of 31%. According to historical data, due to its own characteristics, Tencent’s earnings have fluctuated greatly. The high growth rate in this quarter is mainly due to the current cost increase of 24% year-on-year, which is significantly lower than the revenue growth. If calculated as a percentage of revenue, the cost is calculated by 56% in 19Q2 dropped to 54% in 20Q2, which released profits.
Why is Tencent’s game business performing so well?
Tencent’s game business performance in the first half of 2020 was very good, achieving rapid growth of more than 30% in both quarters in the first half of the year. This was mainly due to the rapid increase in user usage time brought by home isolation. And the subsequent increase in willingness to pay.
In general, although the company’s own strategic planning and the complexity of domestic game approval policies have led to some views that it is not good for Tencent to account for a high proportion of game business, it is undeniable that Tencent is still the most domestic game business. Successful companies are also well-deserved leaders in China’s game industry. Games provide the company with a large amount of revenue each year, and with the growth of overseas revenue, this business of Tencent will be one of the company’s main development drivers for a long time.
Although Tencent’s game business performed well in the first half of the year, Tencent may not be happy about it.
First of all, this growth is sporadic. The so-called “home economy” caused by the epidemic is largely due to the extremely long home quarantine or home office, which has led to a significant increase in the disposable time of users. In February and March when the epidemic was the most severe, many residents even had almost unlimited time to invest Games and various content platforms, and this is obviously temporary. I am afraid that this unexpected growth has faded when the full resumption of work and production resumes.
Secondly, in terms of the game business, Tencent has been trying to reduce the company’s dependence on the game business since it suffered a version number blow in 2018. This is not difficult to understand. The current domestic game market people’s approval still has a strong uncertainty. The National Bank SWITCH, which was launched before, did not give Tencent a very obvious boost. It will be a problem that may be affected by uncertainty at any time. It is obviously not wise to regard business as the core engine of company growth. Although Tencent once reduced the proportion of value-added services to 49% in Q4 2019, this structural change has been completely wiped out by the fluctuations caused by the epidemic. In general, the continued increase in the proportion of the game business is not consistent with the company’s expected strategic direction.
Is the ban on WeChat a big trouble for Tencent?
On August 6, Trump suddenly issued an executive order, saying that WeChat would be “banned” 45 days after the executive order was signed. This is the second paragraph after Tik Tok that was used by the White House as “threatening national security”. The threat of banning Chinese App software caused a sudden uproar in public opinion.
The question is, what happened?
At present, many voices say that the administrative order prohibitsAPP-Pro member page– view in the company value section.
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