Since the beginning of this year, Tencent has received a steady stream of news: declining performance, a sharp drop in stock prices, reduction of major shareholders, investment boss Duan Yongping "bottom copying", staff optimization, reduction of Meituan and other rumors.

As of Aug. 17, Tencent had a market capitalization of HK $2.9 trillion and a share price of HK $303.2 per share, down nearly 60 per cent from last year's peak and about 30 per cent so far this year. Today, is Tencent in the end? Let's take a look at the latest financial data.

Tencent's second-quarter results showed that revenue was 134.034 billion yuan, down 3% from the same period last year, and adjusted net profit was 28.139 billion yuan, down 17% from the same period last year. This is the fourth consecutive quarterly decline in Tencent's net profit since the decline in net profit in the third quarter of last year, but the decline has narrowed from the 23 per cent year-on-year drop in net profit in the previous quarter.

In a conference call on Tencent's second-quarter results on the evening of Aug. 17, Tencent executives said that "the news reports about the sale of Meituan shares are not accurate."

With regard to the decisions on investment and reduction, Tencent executives said that Tencent's focus has always been on the rational allocation of investment, the current book value of the investment is very good, and more forms will be considered to benefit shareholders in the future. Tencent's rebate and buyback actions to shareholders will be maintained in the future.

As for the stock price, Tencent executives said, "at present, Tencent's stock price and investment portfolio are seriously undervalued." At the same time, Tencent is currently implementing cost control measures, and there is still room for further reduction in follow-up costs, including optimization of the number of people and compensation in the previous measures. The company expects that the effect of cost control will be further reflected in the second half of the year, and believes that revenue growth will resume in the coming quarters, even if game revenue remains as it is.

Let's take a look at the main points of the financial report and teleconference.

Tencent senior executive: the stock price is seriously undervalued

The outside world is most concerned about the investment value of Tencent. Let's take a look at the views of Tencent's management.

Tencent held a performance conference call after the release of the financial results on August 17th. As for Tencent's share price, Tencent executives said that Tencent's stock price and investment portfolio are seriously undervalued at present.

At the same time, regarding the report that Tencent reduced his stake in Meituan, Tencent executives said that "the news reports about the sale of Meituan shares are not accurate." "

Tencent executives also said that for investment and reduction decisions, Tencent's focus has always been on the rational allocation of investment. Tencent said that the book value of the current investment is very good, and more forms will be considered to benefit shareholders in the future. Tencent's rebate and buyback actions to shareholders will be maintained in the future.

According to the financial report, as of June 30, 2022, Tencent's fair value of interests in listed investment companies (excluding subsidiaries) is 601.9 billion yuan. In the first half of the year, Tencent's net income from the disposal of the investment company was 23.863 billion yuan.

It is worth mentioning that on June 27th this year, Prosus (majority-owned by Naspers) and Naspers, major shareholders of Tencent announcement Company, announced that Prosus and Naspers would start a long-term and open buyback plan, and would raise funds for the buyback plan in an orderly manner by selling Tencent's shares held by Naspers Group on the market.

After the news was announced, Tencent's share price plunged in the afternoon, followed by a "negative fall" and fell below HK $300 per share on August 2.

At the same time, the investment tycoon Duan Yongping, who operates in reverse with Tencent shareholder Prosus, has also attracted much attention. Since the beginning of this year, Duan Yongping has increased his position in Tencent many times and said that "the more he falls, the more he buys." On August 6, Duan Yongping learned from the information recently disclosed on his snowball account that his current position in Tencent is not high. "at present, it is less than 1%, and it is not yet a substantial investment. I am still thinking about it."

In order to "save" the stock price and boost investor confidence, Tencent took out real money to buy back. According to the financial report, in January, March, April and June this year, Tencent bought back a total of 18.6 million shares with a total repurchase price of HK $7.304 billion, with a repurchase price of between HK $352.8 and HK $477.4 per share. Tencent said the board believes that share buybacks are aimed at improving shareholder value in the long run.

Performance continues to decline, narrowing the decline

Affected by the macroeconomic environment, Tencent has seen a decline in net profit growth since the third quarter of last year. It is worth noting that under a series of cost reduction measures, Tencent's net profit improved, narrowing compared with the year-on-year decline in the previous quarter.

According to the financial report, Tencent's total income in the first half of this year was 269.5 billion yuan, down 1% from the same period last year; the profit attributable to the company's equity holders was 42.032 billion yuan, down 53% from the same period last year; and according to non-international financial reporting standards, the profit attributable to the company's equity holders was 53.7 billion yuan, down 20% from the same period last year.

In the second quarter of this year, Tencent's revenue was 134.034 billion yuan, down 3% from the same period last year, while the profit under non-IFRS was 28.139 billion yuan, down 17% from the same period last year, narrowing from the 23% drop in net profit in the previous quarter, but 10% higher than in the first quarter.

Ma Huateng, Chairman of the Board and CEO of Tencent, said: "in the second quarter, we took the initiative to withdraw from non-core businesses and cut operating expenses, enabling us to achieve month-on-month growth in non-IFRS earnings under pressure on revenue. Looking ahead, we will focus on improving business efficiency and adding new sources of revenue, including the introduction of information stream advertising on the popular video account, while continuing to drive innovation through research and development. About half of our revenue comes from financial technology and corporate services and online advertising, which directly contribute to and benefit from overall economic activity, and China's economic growth will bring us revenue growth opportunities. "

Revenue from games has declined both locally and internationally.

Affected by the epidemic, the domestic and foreign game markets were relatively depressed in the first half of this year.

In the game business sector, affected by the decline in the number of large-scale games released, reduced user consumption and juvenile protection measures, Tencent's income in the second quarter of the game was 42.5 billion yuan. Of this total, revenue from games in the local market was 31.8 billion yuan, down 1% from the same period last year, while revenue from the international market was 10.7 billion yuan, down 1% from the same period last year.

Under the influence of the epidemic, the actual sales revenue of China's game market declined in the first half of this year compared with the same period last year, and the size of users also shrunk slightly. The Game work Committee of the China Audio-Video and Digital Publishing Association and the China Game Industry Research Institute pointed out in the China Game Industry report from January to June 2022 that the sales revenue of China's game market in the first half of the year decreased by 1.8% to 147.789 billion yuan compared with the same period last year, and the number of users was about 666 million, down 0.13% from the same period last year. Among them, the sales revenue of the domestic game market fell 7% in the second quarter compared with the same period last year.

According to the report, China's overall macro-economic growth has slowed, the willingness of the public to spend less, entertainment consumption and even game spending have also declined, coupled with the lack of influential new game products on the market in the first half of this year, failed to bring about consumption increment.

In the international market, affected by the relaxation of restrictions on overseas outbreaks and consumers reducing game spending, there are signs of a decline in revenue in the global game market. According to Sensor Tower, global mobile game revenue in the first half of this year was 41.2 billion US dollars, down 6.6 per cent from the same period last year.

Investment in R & D increased by 17% in 15 billion compared with the same period last year.

In the second quarter, among Tencent's core business sectors, the financial technology and enterprise services sector achieved revenue of 42.208 billion yuan in the second quarter, accounting for 32%.

Tencent's financial technology and enterprise services sector appeared in the financial report for the first time after the restructuring of the "9 / 30" organizational structure in 2018. Since then, the share of revenue has been rising, from 25 per cent in the first quarter of 2019 to more than 30 per cent since 2021. At this point, Tencent industrial Internet and consumer Internet achieve and develop, forming a stable growth "twin engines."

TO B business among the "twin engines" behind, can not be separated from Tencent's continuous increase in research and development, R & D investment in the second quarter increased by 17% year-on-year to 15.01 billion yuan. The improvement of the underlying technical capabilities has also led to the acceleration of business deployment to the cloud, including massive internal self-research businesses such as QQ, Video account and Tencent Conference, which were fully launched in the second quarter.

Tencent said that in the past three years, the cloud scale of Tencent's self-research business has exceeded 50 million cores, with cumulative cost savings of more than 3 billion yuan, and enterprise service gross profit margin increased compared with the previous month.

As of June 30, 2022, Tencent has made public more than 57000 patent applications and granted more than 27000 patents in major countries and regions around the world, of which invention patents account for more than 90 per cent.

The number of Wechat monthly active users is about 1.3 billion

Let's take a look at the changes in user data on Wechat and QQ.

According to data, the number of Wechat monthly active users reached 1.299 billion in the first half of this year, an increase of 3.8 per cent over the same period last year.

Tencent said that digital tools in Wechat ecology have led to a large number of jobs and entrepreneurship, and the number of jobs generated by Wechat ecology in 2021 will reach 46.18 million, an increase of 25.4 percent over the same period last year.

In order to reduce the business pressure of small, micro and individual businesses under the epidemic, WeChat Pay has constantly enriched measures to reduce fees and make profits. Data show that from September 2021 to June 2022, WeChat Pay has made a cumulative profit of about 3 billion in paying service fees, benefiting more than 20 million of small and micro businesses.

At the same time, Tencent highlighted the video number of Wechat: the user participation of the video account has been considerable, and the total user usage time exceeds 80% of the total user time in WeChat moments. The total video playback of video accounts increased by more than 200% compared with the same period last year, the number of video playback based on artificial intelligence recommendations increased by more than 400% year-on-year, and the number of daily active users and daily video uploads increased by more than 100% year-on-year. A series of popular live concerts were held in the second quarter of this year, each attracting tens of millions of users.

However, compared with Wechat, Tencent's early social tool QQ seems to have "peaked" in traffic, with 570 million monthly active users on QQ terminals, down 3.8 per cent from the same period last year.

The latest total number of employees 110700

Since the beginning of this year, Tencent has been hearing a lot of news about layoffs. What is the real situation? Let's take a look at the financial disclosure data.

Tencent Group had a total of 110715 employees as of June 30, 2022, down 5498 from 116213 at the end of the first quarter of this year, according to Tencent's semi-annual report. However, compared with the figure of 94182 employees on June 30, 2021, it is still a year-on-year increase.

Tencent said that the number of employees employed by the group changes from time to time as needed, and the remuneration of employees is determined according to industry practice. The total salary cost for the first six months of this year is 56.779 billion yuan.

In a conference call after the release of Tencent's second-quarter results, Tencent executives said that Tencent is currently implementing cost control measures, and there is still room for further reduction in follow-up costs, including optimization of the number of people and compensation. The company expects that the effect of cost control will be further reflected in the second half of this year, and believes that revenue growth will resume in the coming quarters, even if game revenue remains as it is.