When Hong Kong stocks closed on March 24th, Tencent gave a financial report that both revenue and net profit exceeded expectations. However, compared with the stable performance, Tencent's investment income is more bright, which once again confirms the "banknote ability" of this giant catcher.

In the Q4 quarter of 2020, Tencent's net other income (that is, investment income) attributed to gross profit was 32.9 billion yuan, compared with 57.1 billion yuan in 2020. This is not only for Tencent's Maori blood transfusion, but also for Tencent's market value.

According to the financial report, at the end of 2020, the fair value of the company invested by Tencent reached 981.9 billion yuan, close to trillion yuan, compared with 334.688 billion yuan in the same period last year. The annual growth rate was nearly 650 billion yuan, a year-on-year increase of 193.4%.

Since the establishment of Tencent's investment department in 2008, Tencent has become one of the largest TMT catchers in the world in recent years.

Among the top 10 Internet companies in China by market capitalization, such as Meituan, JD.com, Pinduoduo and other large companies, there is Tencent investment behind them. NIO Inc. in the car-building of the new power is no exception.

Over the past year, the rising share prices of Meituan and NIO Inc. and the listing of Bilibili Inc. on the Hong Kong Stock Exchange have undoubtedly contributed to Tencent's investment income.

For Tencent, the proportion of investment business income expands again, what does this mean? What kind of imagination will it bring to Tencent?

Investment income already accounts for half of gross profit.

Tencent was once labeled as an "investment bank", but now the fruits of the investment are fully reflected in the financial results.

Over the past year, Tencent's investment income is steadily increasing in each quarter, and the proportion of gross profit is also gradually increasing.

In the financial report, Tencent's investment income is mainly reflected in the "net other income" in gross profits. this category mainly includes non-IFRS adjustment items such as the net income from the disposal of a number of investment companies and the fair value net income of investment companies.

According to the latest financial report, in Q4 in 2020, Tencent's net other income was 32.9 billion yuan, including net fair value income due to the increase in the valuation of investment companies in vertical sectors such as social media, e-commerce and online games. as well as the net income from the disposal of a number of investment companies, which is partly offset by the impairment provisions of several investment companies.

So far, Tencent's other net income from Q1 to Q4 in 2020 is 4.037 billion yuan, 8.607 billion yuan, 11.551 billion yuan and 32.9 billion yuan respectively. Q4 increased its net other income by 715% compared with Q1.

More importantly, the share of other net income in gross profit is also gradually increasing.

According to round-the-clock science and technology statistics, net other income accounted for 7.7%, 16%, 20.4% and 55.88% of gross profit in the four quarters of last year, respectively. The share has gradually increased, contributing more than 50% in the Q4 quarter. This means that in the current quarter, half of Tencent's gross profit should be attributed to investment income.

Although the net other income does not belong to the total revenue, it can also reflect the profitability of the investment business by comparing with the latter.

If the net other income is compared with the total revenue, the ratio of Q1 to Q4 is 3.74%, 7.49%, 9.21% and 24.61%, respectively. Equivalent to Q4, the return on investment is nearly 1/4 of the total revenue.

Tencent's share price has risen from more than HK $300 to more than HK $600 in the past year, an increase of about 100 per cent. Its revenue and profit growth rate is much lower than that. The growth rate of investment income is far more than the growth of revenue and profit, which has become an important support of Tencent's market capitalization.

According to the New Fortune report, nearly half of Tencent's total assets are investment assets. From the increase in recent years, we can also see that basically, for every 100% increase in the total market value of listed companies invested by Tencent and BABA, the market value of Tencent and BABA can increase by 0.5%. "

The above report also pointed out that as of November 2020, 52 of the world's 586 unicorn companies stood behind the figure of "investor Tencent", accounting for nearly 1x10, second only to Sequoia Capital.

Tencent has made considerable returns on his domestic and foreign investments in gaming, social media, entertainment and electric cars, the technology media The Information reported on March 9. Insiders revealed that Tencent has begun to sell some shareholding positions to lock in earnings.

BABA, Bernstein, another giant catcher, pointed out that as of March 2 this year, excluding Ant Group, BABA's remaining portfolio was worth about $26 billion.

Invest from to C to to B, looking for the next increment

Since Tencent launched the "9 / 30" reform in 2018 and officially stepped into the industrial Internet, Tencent's revenue structure has been stable into four parts: online games, social networks, financial technology and business services, and online advertising (including social advertising and media advertising).

Among Tencent's main business, the recovered game business still holds the position of cash cow; financial technology and enterprise service have become the second largest revenue pillar; social advertising is growing rapidly, driven by moments advertising; Mini Program and video accounts in Wechat ecology are also accelerating the commercialization of Wechat.

Tencent's fundamentals can be said to be steady, but the hidden worry for every giant is, where can the next growth point be?

Prior to Tencent's "bone scraping treatment", he established the Cloud and Wisdom Industry Enterprise Group (hereinafter referred to as CSIG). Ma Huateng once said for this platform that "the second half of the Internet belongs to the industrial Internet." "

After more than two years of development, CSIG has indeed made a lot of achievements: WeCom currently serves more than 5.5 million enterprise customers and connects with more than 400 million Wechat users; Tencent conference has become the largest independent cloud conference application in China; and Tencent Cloud has jointly launched 54 scenario solutions in cooperation with more than 100 head SaaS vendors.

Tencent's revenue from the financial technology and corporate services business rose 26% year-on-year to 128.1 billion yuan in 2020. Among them, more of the pulling effect comes from financial technology rather than corporate services.

Tencent explained in the financial report that the growth of this sector is mainly driven by the growth of business payment, wealth management services and cloud services driven by the expanded user base and business scale.

Although the growth trend of financial technology is still good, the pressure of financial supervision is still like a sword hanging over its head.

Dolphin Investment Research pointed out that although Tencent's current financial technology business is mainly based on the payment of transaction income, credit, insurance and other businesses are likely to be required to reduce their scale and increase the margin ratio to the level of traditional financial institutions for policy reasons. it may not be immediately reflected in finance in the short term, but the decline in the long-term profitability of this business is inevitable.

What about enterprise cloud services?

In his 2019 annual report, Tencent announced that revenue from cloud services exceeded 17 billion yuan. But since then, Tencent's quarterly financial reports no longer disclose the revenue of cloud services and corporate services. It can be seen that its cloud services are still mainly in the investment stage.

In to B, it will take time for Tencent to commercialize his own business, but investment in to B may provide Tencent with a faster boost.

Since 930, Tencent has not only driven to the industrial Internet in his own business, but also in his investment strategy.

Yao Leiwen, managing director of Tencent Investment, once pointed out in an interview the necessity of investing in to B.

"the industrial Internet chain is longer, customer demand is also very diversified, ecological construction will be more complex, need multi-party cooperation, a variety of capabilities to build the whole ecology. "

According to public data, Tencent has invested in more than 50 companies in to B, including Ming Lue Technology, Simei Technology, KANZHUN LIMITED, Taimei Healthcare, long Yuan Technology, Kingsoft Office and Booz Software.

Through the investment in the industrial Internet, Tencent can get more third-party products, services and solutions, which has enhanced the right to speak on the B side.

In addition, in the window of listing, the listing of the invested enterprises and the rise of the stock price will add fuel to the rise of Tencent's stock price and the high market capitalization.