Why do TENCENT and BABA-SWR still have many growth engines?

Zhitong App has learned that UBS Group AG recently released its outlook for the Chinese internet industry in 2024. UBS Group AG believes that there are still many growth engines in the Chinese internet industry, including overseas markets and artificial intelligence. Fang Jincong, the Head of China Internet Research at UBS Group AG Investment Bank, stated that cooperation between e-commerce platforms is becoming increasingly common. Many companies are exploring interconnection to effectively convert traffic into profits. At the same time, internet companies are actively seeking profit opportunities beyond advertising. The active expansion into overseas markets and integration of artificial intelligence concepts also provide development opportunities for the internet industry.

Fang Jincong expects intensified competition in e-commerce in 2024. On e-commerce platforms, unless there is more industry innovation, competition may continue to focus on establishing low-price market share. Consumers are becoming increasingly sensitive to cost-effectiveness and are more concerned about functionality rather than just brand effects. High-end brands and white-label manufacturers with the highest operational efficiency may perform well, and there is room for improvement in the monetization rate of white-label merchants' advertisements.

In addition, competition in e-commerce on short video platforms may continue to intensify as each platform continues to increase the number of merchants and promote customer attraction through live streaming activities. In the online gaming sector, large game developers with stronger research and development capabilities and those developing certain smaller competitive types of games may perform well.

Fang Jincong pointed out that profit margins have become a greater focus, and reducing costs and improving product efficiency are two ways to increase profit margins. In addition to share buybacks, internet companies have also started to issue dividends.

UBS Group AG stated that the number of Chinese internet users has reached 1.2 billion in the past two years, with an average mobile phone usage time of 7.2 hours per person. The limited number of users and user time constraints have limited the development of internet companies. In addition, the promotion of rational consumption concepts has also encouraged internet platforms, especially e-commerce users, to develop a habit of price comparison, further suppressing price growth.