Tencent’s third quarter report: the revenue of financial technology and enterprise service business was 44.8 billion yuan, up 4% year on year

Source | 01 Finance
On November 16, Tencent Holdings (0700. HK) released its financial report for the third quarter of 2022. The financial report showed that Tencent’s revenue in the third quarter was 140.1 billion yuan, down 2% year on year, and the market expected 141.4 billion yuan; The net profit was 39.94 billion yuan, up 1% year on year. Under non-IFRS, the net profit was 32.25 billion yuan, up 2% year on year.
By the end of today’s closing, Tencent Holdings was trading at HK $294.4, up 2.22%, with a total market value of HK $2820.7 billion. Tencent Holdings’ share price peaked at HK $747.15 per share on February 18, 2021. It began to decline in the second half of 2021 until it fell below HK $200 (the intraday drop to HK $198.6 on October 25). The share price fell by about 70% and the market value evaporated by more than HK $5 trillion. In the past half month, Tencent Holdings’ share price has rebounded by 50%.
Tencent Holdings’ trend chart since 2022
According to the financial report, Tencent’s value-added service revenue in the third quarter decreased by 3% year-on-year to 72.7 billion yuan; Online advertising revenue decreased by 5% to 21.5 billion yuan year-on-year; The revenue of financial technology and enterprise service business increased by 4% to 44.8 billion yuan year-on-year, accounting for 32% of the revenue, and then surpassed the online game sector to become Tencent’s largest revenue contributor. The financial report showed that the year-on-year growth rate of financial technology service revenue was higher than that of the previous quarter, benefiting from the recovery of online and offline commercial payment activities. The revenue from corporate services decreased slightly from the same period, reflecting Tencent’s continued commitment to reducing loss items.
The financial report also showed that in the third quarter, the game revenue in the local market decreased by 7% to 31.2 billion yuan, and the game revenue in the international market increased by 3% to 11.7 billion yuan, or 1% at a fixed exchange rate. As far as individual games are concerned, the revenue of “Glory of the King” and “Elite for Peace” has decreased due to the impact of the minor protection measures effective since September 2021, while the revenue of the recently launched games such as “Mobile Game of Heroes”, “Return to the Empire” and “Manager of Heroes’ League E-sports” has increased.
In terms of research and development, since the “930 revolution”, Tencent has continued to increase its investment in research and development to improve its underlying technical strength. The financial report shows that Tencent’s R&D expenditure in the third quarter was 15.082 billion yuan, up 9.8% year on year, and its proportion in the company’s revenue increased from 9.6% in the third quarter of last year to 10.8%. The accumulated R&D investment in the first three quarters was 45.5 billion yuan, up 20% year on year. Tencent’s sales and marketing expenses in the third quarter fell 32% to 7.1 billion yuan year-on-year.
In recent years, the growth curve of Tencent’s R&D expenditure has far exceeded the growth level of the company’s revenue and net profit over the same period. Since 2019, Tencent has invested nearly 170 billion yuan in research and development.
As of September 30, the combined monthly active accounts of WeChat and WeChat were 1.3089 billion, up 3.7% year on year; The number of daily active accounts of small programs exceeded 600 million, with a year-on-year increase of more than 30%. The average number of daily use of small programs increased faster, with a year-on-year increase of more than 50%. However, the veteran QQ is relatively low. Mobile terminals live 574 million a month, up only 0.1% year on year.
In addition, Tencent announced that it would declare 958 million shares of Meituan as a special dividend. According to the announcement, the Board of Directors decided to declare the special interim dividend of about 958121562 Meituan Class B ordinary shares indirectly held by the Company through Huai River and/or TML in the form of distribution in kind on the basis of one Meituan Class B ordinary share for every 10 shares held by eligible shareholders. At the closing price of HK $166.4 per share on November 15, the total market value of Meituan shares to be distributed is about HK $159.4 billion.