Tencent Q4 recovery spurs hope for 2023

Tencent's (0700) adjusted net profit slid 7 percent to 115.6 billion yuan (HK$131.8 billion) last year but fourth-quarter revenue inched 1 percent higher after two successive quarters of contractions, fueling hopes a Chinese economic recovery coupled with a looser regulatory environment will revive its growth in 2023.

Net income last year fell 16 percent to 188.24 billion yuan for the year. Revenue dipped 1 percent for the first time ever to 554.55 billion yuan, slightly missing an estimate of 555.15 billion yuan.

Income from value-added services inched down by 1.37 percent to 287.6 billion yuan, of which, international games revenues increased by 3 percent but domestic games sales slipped 4 percent due to the implementation of minor protection measures, as well as fewer new game releases.

Online advertising revenue dropped by 7 percent to 82.7 billion yuan with social and other advertising revenue down by 4 percent.

But the gaming and social media leader reported a 15 percent jump in online advertising revenue in the final three months of 2022, as its TikTok-style video feature drew marketers.

While international games revenue climbed 5 percent, the domestic business shrank 6 percent in the fourth quarter.

Despite a drop in revenue, game gross billings had picked up growth in the December quarter, Tencent president Martin Lau Chi-ping said.

"The ads turnaround is pretty positive, showing that WeChat video accounts are a real opportunity for Tencent," said Vey-Sern Ling, senior equity advisor for Asia technology at Union Bancaire Privee. "New approvals of game titles for the domestic market could also help growth this year."

Lau will step down as an executive director in May to improve the firm's governance structure by segregating the responsibilities of the board of directors and the management team, the tech firm said in a separate filing.

Calling artificial intelligence a "growth multiplier," Lau said yesterday that Tencent will gradually integrate AI capabilities across its suite of products from WeChat to online media.

The rise of AI interest and adoption is "very beneficial to us as our core social and gaming businesses are user-to-user oriented, which are hard to disrupt with AI technology, but stand to be enhanced by it," he said.

Lau said Tencent's aggressive cost controls last year will become a long-term measure going forward with a focus on improving efficiency. It proposed a final dividend of HK$2.4 per share.

Separately, JD Health International (6618) swung to a profit of 383.2 million yuan last year from a loss of 1.07 billion yuan with income rising 52.3 percent to 46.73 billion yuan.

And Chinese question and answer forum website Zhihu's (2390) net loss widened by 21.5 percent to 1.58 billion yuan despite a similar pace of growth in revenue to 3.6 billion yuan.