Tencent’s 2Q revenue missed market consensus, but the results beat because of cost-cutting measures. Domestic online game revenue was flat yoy, and overseas game revenue dropped 1% yoy (vs. 8% yoy in 1Q22). Performance of fintech and business services was impacted by macro headwinds (such as the COVID-19 outbreaks). The soft performance in 1H22 was in line with our previous discussion that 2022, especially 1H, would be challenging for the industry and for Tencent. We reiterate the view that 2022 will be challenging for both the industry and Tencent, especially in 1H, given delays in the launch of online game licenses and the implementation of regulations in various segments. We lowered our net profit forecasts slightly for 2022F, 2023F and 2024F after the 2Q22 results announcement. The Company’s initiatives (cost control and Video Accounts) should ease market concerns somewhat. We still hold a constructive view on the Company, as we believe that its investments will translate into future growth and that the recent message from the Chinese government is turning more positive on the sector. Reiterate ADD with a new DCF-based target price of HK$418.6 (down from HK$440.6). A near-term catalyst would be securing online game licenses and a pick-up in the revenue growth rate.