Despite China’s stringent regulations, Tencent’s profits still grow by 29%

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Tencent Holdings Limited Update

Tencent reported a sharp increase in its profits in the second quarter as one of China’s largest technology groups broke expectations for greater regulatory crackdowns on Beijing.

Despite some signs of slowing growth and investors’ general concerns about social media and fintech groups Will be swallowed The regulatory storm has hit most of China’s technology industries.

The measures taken by the Chinese government against groups ranging from video game manufacturers to education providers have reduced the value of Chinese companies, including Tencent, by tens of billions of dollars. In the past six months, the Shenzhen-based company’s share price has fallen by more than 40%.

Tencent said on Wednesday that its net profit for the three months ended June increased by 29% year-on-year to RMB 42.6 billion (US$6.6 billion). This is much higher than the 34 billion yuan estimated by analysts released by Refinitiv.

After the company’s financial technology and business services division grew by 40%, its revenue increased by 20% year-on-year to RMB 138 billion.

The strong performance of this sector, including the mobile payment platform WeChat Pay, is experienced Warning from financial regulators This quarter, it has cooperated with Tencent and other Chinese financial technology companies to “rectify” transparency and loan risk issues.

under Increasing scrutiny Chief Executive Ma Huateng from Beijing noticed the company’s social contribution.

“We are increasingly deploying our technology and expertise to help SMEs, public services [and] The company cooperates internally and establishes connections with users externally, and we believe that this contributes to the real economy and society as a whole,” he said in a statement to the Hong Kong Stock Exchange.

Tencent’s game business revenue in the second quarter increased by 12% year-on-year as the company emphasized Try to correct the route The Chinese official media slammed the game this month as “Spiritual Opium“. However, analysts are still concerned about slowing growth in this sector.

Shawn Yang, managing director of Blue Lotus Capital Advisors, said some analysts may have overestimated the short-term impact of the stricter regulatory environment.

However, he said that there are signs that Tencent’s higher-margin sectors (including games) have slowed growth, which will offset the strong performance of the lower-margin FinTech sector. He said that the increase in advertising revenue also reflects the low base effect since the Chinese economy began to recover from Covid-19 last year. “Growth is slowing… You should expect this slowdown to continue in the next one or two quarters.”

Tencent has tightened regulations on how long minors can play online games and is deploying facial recognition technology to prevent young people from circumventing the rules.

The company said: “We have always sought to create a healthy gaming environment in the gaming industry,” and added that “players under the age of 16 account for 2.6% of our total gaming revenue in China” and the gaming sector “benefits from international growth”.

Investors are also carefully studying the results of possible write-downs of companies backed by Tencent. new rule On the private education industry in China.

Under radical reforms, companies were prohibited from profiting from teaching school subjects and were prohibited from accepting foreign investment.

Here is Crushed stock In the education field of 100 billion US dollars per year, this has always been an important investment focus of Tencent through VIPKID and Yuanfudao, and it is also an important source of advertising revenue.

Tencent stated that its mobile advertising network’s revenue fell quarter-on-quarter due to “reduced spending by companies that provide extracurricular tutoring,” but this was offset by the contribution of the recently acquired auto comparison site Bitche. Broader online advertising revenue increased by 23%.

Tencent did not report any write-downs in its education investments.

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