Although the game plate is under pressure, Tencent, an aircraft carrier, is turning very fast, and investors cannot look at the old waterway with binoculars.

Tencent (HK:00700) released its quarterly report for 2018 on November 15. The Q3 figures are as follows:

Revenue of 80.6 billion yuan, an increase of 24% over the same period last year

The net profit was 23.3 billion yuan, up 30% from the same period last year.

Non-GAAP net profit of 19.7 billion yuan, an increase of 15% over the same period last year

The number of Wechat monthly active users is 1.083 billion, up 10.5% from the same period last year.

Outsiders think that Tencent's income has slowed down. But in my opinion, Tencent is fine, the problem is too high expectations.

Tencent is a large company with an annual income of more than 300 billion, coupled with the superposition of cyclical fluctuations, if investors have correct expectations for Tencent (do not expect a growth of more than 40% or more than 50% as in previous years), then the financial report is still pretty good.

This is basically the view of the mainstream institutions in the market. Of the 50 analysts tracked by Tencent on Bloomberg, only one is a sell rating. Tencent's share price soared 5.8 per cent yesterday.

If you look at the Q3 performance of another giant BABA, you will find that the situation is similar to that of Tencent, and you will know that there is nothing wrong with the market!

BABA Q3 strips out extension Others income, that is, other income (new retail, rookie, ele.me, word-of-mouth, etc.), and core e-commerce revenue is 56.2 billion, up 29.9% from the same period last year, compared with 55% in the same period last year.

Take another look at Baidu, Inc.. Q3 income is 28.2 billion yuan, an increase of 27.2% over the same period last year. However, advertising revenue is 22.48 billion yuan, accounting for as much as 80% of the total revenue, which has always been a state of living.

Compared with the three BAT companies, Tencent's existing business and new business appear to be more dynamic.

Further in-depth discussion, Tencent still has a unique problem. Because the regulatory adjustment can not get the game version number for the time being, and the main games such as "eating Chicken" cannot be realized, so it has not yet reached the true level of Tencent. When the game regulation is adjusted next year-- supervision is for the benign development of the industry rather than directly abolished-- look again: Tencent or that Tencent, I think the rapid development of 30% performance is no problem.

It is worth noting that although the game plate is under pressure, the turn of the aircraft carrier Tencent is still very fast, investors can not look at the old channel with binoculars.

Note: Tencent is no longer a simple game company, from the financial data of segment income, we can already see the change.

In 2014, the revenue from online games was 44.8 billion yuan, accounting for 57% of the total income, while online advertising plus other income was 15.6 billion yuan, accounting for 20% of the total income.

From January to September 2018, online game revenue was 79.8 billion yuan, accounting for 35% of the total revenue, while online advertising plus other income was 94.8 billion yuan, accounting for 42% of the total income.

Why should I compare online advertising and other businesses (mainly Tencent Cloud and third-party payments) with online games? This represents that Tencent walks on one leg from the consumption of the Internet to the two-legged walk of the "consumption Internet + Industrial Internet" (which will be analyzed in detail later).

In addition to the growth rate and income structure, Tencent's third quarterly report also has the issue of net profit worth talking about.

Some investors are pessimistic about Tencent, believing that "net profit includes changes in the valuation of the companies invested, which is innumerable." Let's take a step back and think that if we want to get the leading shares in the industry at a low price, we can wake up even when we sleep. As for not quitting? You can understand Buffett's concept of "perspective surplus". In the future, these Internet leaders will definitely generate more profits than companies in traditional industries.

With regard to the current valuation, the market is still too harsh on Tencent. There is no harm if there is no comparison:

Tencent's dynamic price-to-earnings ratio is 27 times.

XIAOMI's dynamic price-to-earnings ratio is 42 times (after adjustment of non-universal accounting standards)

BABA of US stocks, with a dynamic price-to-earnings ratio of 41 times

Baidu, Inc. of US stocks has a dynamic price-to-earnings ratio of 15 times (the low valuation level stems from the fact that Baidu, Inc. has a problem with internal governance).

Note: the above data are from Oriental Fortune Choice.

It can be said that Tencent's relative underestimation is obvious, which is the reason for a large number of investors to stick to it.

But for the future view, I find that everyone's attention is not quite the same. After the release of the three-quarter report, we can see that investors are concerned about the income statement and the game business.

But the logic of growth does not stop there, I said above: first, the game regulation will return to growth after deregulation; second, the industry Internet this new growth curve, which is a neglected gold mine.

At the China Internet + Digital economy Summit on April 12 this year, Ma Huateng proposed that Tencent should be a "digital assistant" in various industries to promote the construction of digital China. Since then, the concept of industrial Internet, in Ma Huateng and Tencent management to participate in various meetings, speeches, have been constantly mentioned and strengthened.

But to be recognized by the outside world, it was after Tencent adjusted the structure and established CSIG (Cloud and Smart Industry Enterprise Group) on September 30th.

Because from the perspective of common sense, it is almost impossible to carry out new industrial Internet business when the organization is too large, the levels are too many, and the lines are too scattered.

Tencent adjusts the structure, and the newly established CSIG integrates internal solutions such as Tencent Cloud, Internet +, Smart Retail, Education, Healthcare, Security and LBS; Tang Daosheng, who has successfully transformed and upgraded QQ and Qzone (the most difficult part of Tencent), is the president; KPI should be ordered and authorized to sweep away Tencent's industrial Internet worries.

There may be investors who do not know what the industrial Internet is.

The original Internet is a connected Internet, which is essentially a physical connection, connecting people, connecting information, connecting goods, and so on.

And the industrial Internet is to be integrated with every industry, which must have chemical reactions, which requires Tencent and B-end (enterprise) and G-end (government) to really go deep into the industry in a down-to-earth manner. to improve the production efficiency of the whole industry. To be able to understand the supply chain, understand the ecology of the upstream and downstream, improve the operational efficiency within the enterprise, and continue to invest in the field of research and development, these are new challenges.

The essence of the industrial Internet is: in the information age, traditional enterprises who first accept digital transformation, iterate first, go to the "cloud" first, and first find a way to accurately reach the target consumers, who will achieve huge savings in management costs, sales costs, manpower costs, software and hardware costs, resulting in competitiveness, or natural elimination.

For Tencent, it is to direct the huge stock traffic on the C side (802.6 million monthly active users of QQ and 1.0825 billion monthly active users of Wechat) to the B side in a better way. In this digitization process, Tencent, enterprises and consumers all benefit, which is a natural process of improving and improving efficiency.

In fact, Internet +, which Tencent strongly advocated a few years ago, is the embryonic form of the industrial Internet. But now there has been evolution in terms of means, such as Pinduoduo, Tongcheng Yilong, etc., mainly through Mini Program, and Tencent can now give much more than that.

In order to realize the strategy of industrial Internet and achieve the goal of "digital assistant", what Tencent can do is as follows:

Make a good connection to provide a "digital world" interface for various industries, namely API (Application programming Interface)

Make good tools to provide various industries with complete "digital toolbox", that is, SDK (software development kit)

Do a good job in ecology, adhere to the concept of open cooperation, provide a new type of infrastructure, stimulate innovation among participants, and jointly build a digital ecology.

Comprehensive industrial enabling ecology can comprehensively transform the enterprise's supply chain, design, products, marketing and other links, and greatly improve efficiency. So far, there have been many successful cases:

The "Intelligent Network-connected Cloud platform" jointly developed by Guangzhou Automobile and Tencent uses AI to connect cars to provide users with rich online ecological services.

Haida Group has joined hands with Tencent to build a 10,000-person mobile Internet platform. The use of WeCom has increased its sales order acceptance efficiency by 50% and reduced the billing time by 90%.

Pizza Hut was empowered by Tencent to open a "cool techs restaurant" to create smart food and beverage.

The efficiency of the Chongqing Electronic Taxation Bureau, which is realized through the official account of Wechat, has been improved by 90%.

That said so much, Tencent industry Internet, if it can be made, which aspects of finance will eventually be reflected? Most intuitively, the industrial Internet can not bypass key nodes such as Tencent Cloud, third-party payment and online advertising.

(1) Tencent Cloud. Can provide enterprises with infrastructure, that is, computing, storage and other capabilities, without having to buy expensive servers. This is very important, when the early start-up Tencent did not enjoy the cloud, was almost dragged down by the purchase of a server. Tencent Cloud can also provide smart retail SAAS services for enterprises, which can be used as a window to transfer a lot of business capabilities to end B. Tencent's cloud revenue from January to September 2018 was 6 billion yuan, more than double that of the same period last year.

(2) third party payment. This can be said to be the "starting style" of Tencent's industrial Internet, because enterprises, no matter what business they carry out, should get used to the habit of consumers using QR codes to pay. Today, mobile payment has become one of China's "four new inventions" and an important bridge between online and offline connections. This scene is deeply rooted in the hearts of the people. Tencent's payment business remains the leader in China, with the average daily transaction volume increasing by 50% compared with the same period last year, of which the offline daily average transaction volume increased by 200% compared with the same period last year.

(3) online advertising. Enterprises need to accurately reach the target consumers. Tencent, through big data's ability, can accurately give portraits of more than one billion of his active users (QQ and Wechat) and help enterprises complete accurate marketing in the form of online advertising. In this way, online advertising revenue has greatly increased, with social and other advertising revenue up 61% in the third quarter compared with the same period last year, thanks to moments, Mini Program, mobile advertising alliance and so on.

About Mini Program also have to focus on: Mini Program is the embryonic form of the industrial Internet, the "minimalist version" of the industrial Internet.

Mini Program makes it easy and low-cost for many enterprises and cities to "surf the Internet". After they taste the convenience of digitalization, though not to a deep extent for the time being, they will go deeper. Guangdong, for example, has taken a step forward, from Mini Program on buses and subways to "Yueshengshi" Mini Program to provide more than 100 livelihood services in one stop.

Ma Huateng revealed at the Fifth World Internet Congress on November 7 that "1.5 million developers have joined the development of Mini Program. The number of Mini Program applications has exceeded 1 million, covering more than 200 segments of industries, and the number of daily active users has reached 200 million." The current influence of Mini Program is evident, and the trend of Mini Program and even Tencent Cloud must not be ignored.

Of course, no matter the micro Mini Program or the larger macro industrial Internet, the significance for Tencent is not one-sided, not only to open up a new growth curve. To realize that the industrial Internet can co-evolve with the original consumer Internet:

The consumer Internet without the support of industrial Internet is just a castle in the air.

The Internet, an industry that is not powered by the consumer Internet, is like a river that cannot connect to the sea, drying up in the desert.

In the long run, the industrial Internet is the trend of the times, a giant business. Once again, traditional industries can not use digital means to transform themselves to improve efficiency, it will certainly be eliminated, which has gradually become the consensus of various industries.

It is advisable to keep an eye on things when they are long.

Reviewing Tencent's 20-year history, every structural adjustment (upgraded to BU division system in 2005 and BG enterprise group system in 2012) will burst into huge energy. After this structural adjustment, if the industrial Internet is successful in the future, how much value will Tencent's consumer Internet and industrial Internet create?