The transaction amount of applets continues to double - applets are warmly welcomed by corporate customers. Their transaction value is already at the forefront of domestic e-commerce, and I believe they will have a great positive effect on WeChat's advertising revenue.

Financial technology is growing steadily - WeChat applets have led to rapid growth in digital payment services; cloud business scale effects have gradually increased. Coupled with higher gross margin PaaS and SaaS revenue rising faster than IaaS with lower gross margins, corporate service gross margins have continued to improve.

Internationalization of Tencent games - Tencent's overseas market development has potential. It is expected to offset the limitations of revenue growth caused by factors such as mainland game regulation and industry competition. Tencent's overall game revenue is still expected to increase in the second half of the year.

Valuation - We gave Tencent a “buy” rating. The valuation was lowered from HK$796 per share to HK$779 per share. This valuation is estimated based on the classification plus total valuation model (Sum of the Parts Calculation). Based on the closing price of HK$460.20 per share on September 24, 2021, the valuation was reduced by 40% from the current price.

Investment Strategy - In the first half of 2021, Tencent's business growth was generally in line with expectations, but due to the new game ban and the contraction of the education industry, it is expected to put pressure on the Group's gaming and advertising revenue in the second half of the year. Looking ahead to this year, we estimate that the Group's revenue will increase by 18.8% this year. Despite strong supervision, the prospects for business growth are slightly unclear. We lowered the valuation slightly to HK$779 per share, but the valuation reached 40% off the current price. We gave Tencent a “buy” rating and suggested investors absorb it at their current price.