Preview | TENCENT performance to be unveiled on Wednesday! "Dream of the Yuan" streaming performance becomes the focus of market attention

According to the financial news app Zhitong Finance, TENCENT (00700) will announce its 2023 fourth-quarter performance on March 20 (this Wednesday). The market expects TENCENT's Q4 2023 revenue to be 157.364 billion RMB, a year-on-year increase of 9%; adjusted net profit to be 41.469 billion RMB, a year-on-year increase of 40%, with an expected earnings per share of 3.58 RMB. Specifically, Q4 revenue for the gaming business is expected to increase by 4% year-on-year; social networking revenue by 1% year-on-year; advertising revenue by 16% year-on-year; and financial technology and enterprise services revenue by 15% year-on-year.

Morgan Stanley predicts that TENCENT's Q4 2023 revenue will increase by 8% year-on-year, with online gaming revenue increasing by 1%. Morgan Stanley mentioned that the market will focus on the performance of the mobile game "Dream Star" and the multiplayer online battle arena game (MOBA) in December last year to observe the driving force for accelerated game revenue this year.

It is reported that since December last year, the battle between TENCENT's "Dream Star" and NetEase's "Egg Party" games has been closely watched in the gaming industry. At the 2023 TENCENT annual meeting on January 29, Ma Huateng criticized that compared to competitors, TENCENT's gaming business lacks standout products. The new products Ma Huateng referred to from competitors mainly include NetEase's "Justice" mobile game and "Egg Party," as well as miHoYo's "Honkai: Star Rail," among others.

According to DataEye data, the investment in promotional materials for "Dream Star" has been on the rise since January. However, since the normalization of competition with "Egg Party," Dream Star has not shown signs of surpassing Egg Party. Third-party data shows that Egg Party users have a higher acceptance and satisfaction with paid props, with ARPU stable at around 35 RMB, while Dream Star's ARPU is around 10-17 RMB.

Furthermore, the income gap between "Dream Star" and "Egg Party" is becoming more apparent. According to Qimai data, in the estimated revenue performance on the iOS platform from February 4 to February 24, "Dream Star" was at 4.6391 million USD, while "Egg Party" reached as high as 20.2079 million USD.

According to NetEase's 2023 financial report, since its launch in 2022, "Egg Party" has accumulated 500 million registered users, and the "Justice" mobile game series has also reached a new milestone with over 100 million active users. As the net income from games such as "Egg Party" and "Justice" increases, NetEase's net income from mobile games accounted for approximately 75.2% of online game net income in 2023, compared to 67.0% in 2022. NetEase's total revenue in 2023 exceeded 100 billion RMB, reaching 103.5 billion RMB, a year-on-year increase of 7.25%; of which, gaming revenue reached 81.6 billion RMB, a year-on-year increase of 9.4%, further increasing its share of NetEase's total revenue to 78.8%As long as "Dream Star" cannot demonstrate overwhelming performance in gameplay, graphics, and other aspects compared to other products, it will be difficult to attract players. Some senior game industry insiders even believe that in 2024, the advantages of "Egg Party" will be further highlighted, leading to a widening gap in market share and revenue compared to "Dream Star."

New games from TENCENT performed weaker than expected, but old games continue to show growth resilience. According to data from Point Data, games like "Honor of Kings" and "Peacekeeper Elite" exceeded one billion yuan in revenue from February 9th to February 17th. TENCENT's financial report shows that due to the increased revenue from games like "Arknights," "Code: Antimatter," "MapleStory," as well as perennial games like "Honor of Kings" and "DNF," TENCENT's domestic gaming revenue in 2023Q3 increased by 5% year-on-year to 32.7 billion yuan, but the growth rate lags far behind the international market's 14%.

It is worth mentioning that "Dungeon & Fighter: Origin" started testing on February 29th, which may lead to accelerated revenue growth for TENCENT if launched this year and potentially increase its valuation.

Regarding short videos, the financial report shows that TENCENT's short video platform saw a year-on-year growth of over 50% in total views in 2023 Q3, with advertising revenue reaching 25.7 billion yuan, hitting a historical high and increasing by nearly 20% year-on-year. According to multiple media reports, in 2023, the scale of WeChat short video live streaming e-commerce significantly increased year-on-year, with GMV growth nearly tripling that of the previous year, supply quantity increasing by over 300%, and order quantity increasing by over 244%. Among them, the GMV share of WeChat short video live streaming for electronic brands reached 15%, with a growth rate of 226%.

In January this year, Pony Ma stated at the TENCENT annual meeting that in 2024, the company will fully develop short video live streaming e-commerce. Leveraging WeChat's over one billion daily active users, the investment flow of short videos can be targeted precisely to individual users, who are private domain users of their own brands, thereby significantly increasing conversion rates. With a focus on short video e-commerce, TENCENT is bound to make another impact on the e-commerce industry.