$TENCENT(00700)$ will release its results for the quarter ended June 30, 2022 on Wednesday, August 17, Beijing time.
According to Bloomberg consensus estimates, Tencent Holdings is expected to report revenue of RMB135.598 billion for the second quarter, down 1.9% year-on-year, and adjusted net profit of RMB24.584 billion, down 18.5% year-on-year.
Soochow Securities believes that Tencent has a solid business barrier, strong ecology, video number and small programs and other ecological nodes also have a strong potential for realisation; financial technology business has shown significant performance elasticity. However, due to the epidemic makes the advertising demand put down, the blockade brings the financial payment field use frequency reduction, or suffer more.
Game business is weak in the short term, but a reversal of difficulties is expected
Soochow research report mentioned that 2022Q2 Tencent has no head of new games on line, and the repeated epidemic in many parts of the country and the macro environment downward led to a decline in users' willingness to consume games, the game short-term performance under pressure.
The year-on-year growth rate of overseas game market has declined. Therefore, it is expected that the local revenue is 31.5 billion yuan and the overseas revenue is 11 billion yuan, and the total revenue of game business in 2022Q2 is 42.5 billion yuan, down about 1% year-on-year.
On 22 June Tencent game conference announced 12 new games, in 22Q3 and longer term, the launch of new games is expected to drive the growth of the number of users and ARPU of the game business, thus contributing to incremental revenue.
China Pacific Securities believes that with the epidemic under control, macroeconomic recovery expected to drive consumption rebound, the normalization of the issuance of version numbers to facilitate the launch of new games, the long-term stable operation of core games and the policy to strongly encourage cultural products to go to sea, combined with the advantages of summer, the game business is expected to usher in a policy inflection point, and the reversal of difficulties is expected.
Social network revenue increased slightly year-on-year
High-quality dramas and variety shows have led to growth in paid subscribers, with "Meng Hua Lu" in particular shining, ranking first in the Q2 webcast drama broadcast index, with a broadcast volume of 900 million, and a Douban movie rating of 8.1, with good word-of-mouth and hotness.
Dongwu expects 2022Q2 social network revenue of 29.5 billion yuan, an increase of about 1.8% year-on-year; as the second half of the drama comprehensive resource reserves continue to broadcast, social network revenue will continue to improve.
Advertising under short-term pressure, future video number is expected to drive long-term growth in advertising revenue
In April-May, the serious epidemic in many domestic places and the regulation of some industries led to a decline in advertising demand, and internet advertisers controlled their marketing spending and reduced their willingness to place.
As a result, Dongwu expects total advertising business revenue of 16 billion yuan in 2022Q2, down about 30% year-on-year, with media advertising revenue down about 33% and social advertising down about 29% in the same period. Zhongtai said that with the improvement of the epidemic situation in Q3 and the economic rebound, advertisers' demand is expected to be boosted.
The WeChat video number user experience has more room for growth in the future, with more diversified ways of realisation, and the commercialisation of the video number is expected to become a long-term driver of Tencent's advertising revenue.
Financial technology and corporate services expected to slow growth, long-term earnings quality is expected to continue to improve
22Q2 The implementation of epidemic closure and control in many parts of the country has caused restrictions on both online and offline payment scenarios, with financial payment business being more affected. Soochow expects financial technology and corporate services revenue to be approximately RMB43.2 billion, up approximately 3% year-on-year, slowing growth.
In the long term, demand for digital payments will recover quickly after the outbreak is brought under control; in corporate services, the redefinition of cloud services and loss reduction will also continue to drive growth in fintech and corporate services margins.
What to make of South Africa's major shareholder Naspers' proposed continued reduction in holdings?
As for Naspers, the major shareholder that investors are most concerned about, reducing its holdings, Shenwan Hongyuan Hong Kong said in a research note that according to Tencent's 2021 annual report, Naspers holds about 2.769 billion shares in Tencent via Prosus, equivalent to 28.82% equity.
Unlike the previous two concentrated holdings, this time Prosus is taking a small, continuous approach to reducing its holdings, and the number of Tencent shares sold each day will not exceed 3-5% of Tencent's average daily turnover. In terms of the reduction plan itself, Prosus hopes to sell as little as possible at the current undervalued price in order to maintain its shareholding in Tencent, continue to reap future appreciation and maximise its own interests.
In summary, as the major shareholder is reducing its stake by a significant amount, it will take a long time to complete the reduction and there is a chance that the share price will remain under pressure due to supply and demand. If you are looking to capture a technical rebound after a sharp fall in share price, you should only deploy in the short term based on technical trends.
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