Financial Performance - Total revenue for Q3 2024 was RMB 7.02 billion (USD 1 billion), representing a year-over-year increase of 6.8% driven by strong growth in online music services, partially offset by declines in social entertainment and other service revenues[4]. - Net profit for Q3 2024 was RMB 1.71 billion (USD 244 million), a year-over-year increase of 35.3%, with net profit attributable to equity holders rising by 35.5% to RMB 1.58 billion (USD 226 million)[4]. - Operating profit for Q3 2024 increased by 50.5% year-over-year to RMB 2.14 billion (USD 306 million)[11]. - Gross margin improved from 35.7% in Q3 2023 to 42.6% in Q3 2024, primarily due to strong growth in music subscription and advertising revenue[10]. - Operating expenses decreased by 3.9% year-over-year to RMB 1.22 billion (USD 174 million), with operating expenses as a percentage of total revenue declining from 19.3% to 17.4%[11]. User Metrics - Online music subscription revenue grew by 20.3% year-over-year to RMB 3.84 billion (USD 547 million), with the number of paying users increasing by 15.5% to 119 million, and a net increase of 2 million users quarter-over-quarter[4]. - The number of monthly active users for online music services decreased by 3.0% year-over-year to 576 million, while the number of monthly active users for social entertainment services dropped by 30.2% to 90 million[6]. - The number of super members exceeded 10 million, with higher average revenue per user and engagement compared to non-super members[8]. - The number of online music paying users increased by 15.5% year-over-year to 119 million, with average revenue per paying user per month at RMB 10.8[9]. Cash and Investments - As of September 30, 2024, the total balance of cash, cash equivalents, time deposits, and short-term investments was RMB 36.04 billion (USD 5.14 billion)[4]. - The company repurchased approximately 42.1 million American Depositary Shares for about USD 335.5 million, with around USD 100 million spent in Q3 2024[5]. - As of September 30, 2024, the company had cash and cash equivalents totaling RMB 36.04 billion (USD 5.14 billion), up from RMB 35.03 billion as of June 30, 2024[12]. - The net cash inflow from operating activities for the nine months ended September 30, 2024, was RMB 7,795 million, compared to RMB 5,360 million for the same period in 2023, an increase of 45.49%[31]. - The company reported a net cash outflow from investing activities of RMB 8,142 million for the nine months ended September 30, 2024, compared to RMB 1,670 million for the same period in 2023[31]. Strategic Initiatives - The company expanded partnerships with major record labels and launched strategic collaborations to enhance its content offerings, including a partnership with Galaxy Corporation for K-pop content[7]. - The company implemented operational strategies and enhanced member benefits, driving growth in overall membership and super membership[8]. - The company expects continued growth in online music services and anticipates a recovery in social entertainment services in the upcoming quarters[21]. - The company is focusing on new product development and market expansion strategies to enhance user engagement and revenue growth[21]. Shareholder Information - The company repurchased approximately 42.1 million American Depositary Shares for about USD 335.5 million as part of a USD 500 million share repurchase plan[13]. - Basic earnings per share for the three months ended September 30, 2023, was RMB 0.37, compared to RMB 0.51 for the same period in 2024[26]. - The company reported a diluted earnings per share of RMB 0.37 for the three months ended September 30, 2023, compared to RMB 0.50 for the same period in 2024[26]. Balance Sheet Highlights - As of December 31, 2023, total assets amounted to RMB 75,536 million, increasing to RMB 84,613 million by September 30, 2024, representing a growth of 12.57%[29]. - Non-current assets increased from RMB 45,600 million to RMB 50,087 million, a rise of 9.76%[29]. - Total equity increased from RMB 57,202 million to RMB 65,229 million, reflecting a growth of 14.09%[30]. - The total liabilities increased from RMB 18,334 million to RMB 19,384 million, a rise of 5.73%[30]. - The company's goodwill stood at RMB 19,542 million as of December 31, 2023, slightly increasing to RMB 19,647 million by September 30, 2024[29].

Investment Rating - The report assigns a "Buy" rating for Tencent Music (1698.HK) as part of its initial coverage [1]. Core Insights - The report highlights continuous optimization of profit margins, with both paid users and ARPU (Average Revenue Per User) showing growth, driving strong performance in the online music subscription business [3][4]. Financial Performance Summary - In Q2 2024, Tencent Music reported revenue of 7.16 billion RMB, a year-over-year decrease of 1.7% but a quarter-over-quarter increase of 5.8%. Operating costs were 4.15 billion RMB, down 13.3% year-over-year and up 3.8% quarter-over-quarter. The IFRS net profit attributable to shareholders was 1.68 billion RMB, up 29.6% year-over-year and 18.3% quarter-over-quarter [3]. - The company achieved a gross margin of 42.0%, an increase of 7.8 percentage points year-over-year, primarily due to strong growth in music subscription and advertising revenues [3]. - As of the end of Q2 2024, the company had cash and cash equivalents totaling 35.03 billion RMB, an increase of 0.85 billion RMB from Q1 2024 [3]. Online Music Business Growth - Online music business revenue reached 5.42 billion RMB in Q2 2024, representing a year-over-year increase of 27.7% and a quarter-over-quarter increase of 8.2%. Subscription revenue was 3.74 billion RMB, up 29.4% year-over-year and 3.3% quarter-over-quarter, driven by growth in paid users and ARPU [4]. - The number of paid users for online music reached 117 million, a year-over-year increase of 17.7% and a quarter-over-quarter increase of 3.1%. The paid user rate was 20.5%, up 3.8 percentage points year-over-year [4]. Social Entertainment Business Adjustments - Social entertainment and other services revenue was 1.74 billion RMB in Q2 2024, down 42.8% year-over-year and 1.4% quarter-over-quarter, primarily due to adjustments in live interaction features and increased market competition [5]. Earnings Forecast and Valuation - The report forecasts revenues of 28.83 billion RMB, 32.00 billion RMB, and 34.95 billion RMB for 2024, 2025, and 2026 respectively. The net profit attributable to shareholders is expected to be 6.34 billion RMB, 7.62 billion RMB, and 8.60 billion RMB for the same years [6][7]. - The adjusted PE ratios are projected to be 21, 18, and 16 for 2024, 2025, and 2026 respectively, indicating a healthy growth outlook for the company [6].

Investment Rating - The report maintains a "Buy" rating for Tencent Music, with a target price of HKD 53.17 [4][2]. Core Insights - In Q2 2024, Tencent Music reported revenue of CNY 7.16 billion, a year-over-year decrease of 1.7% but a quarter-over-quarter increase of 5.8%. The company expects Q3 revenue to reach CNY 7 billion, reflecting a year-over-year increase of 6.7% [1]. - The gross margin for Q2 2024 was 42.04%, up 7.77 percentage points year-over-year and 1.10 percentage points quarter-over-quarter, driven by strong growth in music subscription and advertising services [1]. - The online music service revenue for Q2 2024 was CNY 5.42 billion, a year-over-year increase of 27.65% and a quarter-over-quarter increase of 8.33%. The company anticipates Q3 revenue of CNY 5.6 billion, a year-over-year increase of 23% [1]. - The social entertainment service revenue for Q2 2024 was CNY 1.74 billion, a year-over-year decrease of 42.84% and a quarter-over-quarter decrease of 1.42%. The company expects Q3 revenue to decline to CNY 1.4 billion [1]. Financial Summary - The report forecasts net profit attributable to shareholders for 2024, 2025, and 2026 to be CNY 6.7 billion, CNY 8.2 billion, and CNY 10.2 billion respectively, reflecting an upward adjustment due to increased ARPPU and gross margin [2]. - The expected ARPPU for Q3 2024 is CNY 10.9 per month, with a projected annual membership revenue of CNY 15.2 billion for 2024, a year-over-year increase of 26% [1][2]. - The report provides a comparison of valuation metrics with peer companies, suggesting a P/E ratio of 25 times for 2024 [2][8].

Revenue Performance - Total revenue for Q2 2024 was RMB 7.16 billion (USD 985 million), a year-over-year decrease of 1.7% primarily due to declines in social entertainment services and other services revenue, partially offset by strong growth in online music services revenue [3]. - Total revenue for Q2 2024 was RMB 7.16 billion (USD 985 million), a decrease from RMB 7.29 billion in Q2 2023 [7]. - Online music service revenue grew by 27.7% year-over-year to RMB 5.42 billion (USD 746 million), driven by a 29.4% increase in subscription revenue to RMB 3.74 billion (USD 515 million) [8]. - The total revenue for the six months ended June 30, 2023, was RMB 14,290 million, a 5.5% increase from RMB 13,550 million in the same period last year [18]. Profitability - Net profit for Q2 2024 was RMB 1.79 billion (USD 247 million), a year-over-year increase of 33.1%, while net profit attributable to equity holders was RMB 1.68 billion (USD 231 million), up 29.6% year-over-year [3]. - Operating profit for Q2 2024 increased by 42.8% year-over-year to RMB 2.20 billion (USD 302 million) [9]. - Non-IFRS net profit for the three months ended June 30, 2023, was RMB 1,348 million, representing a 10.5% increase compared to RMB 1,221 million in the same period last year [18]. - The company reported a net profit attributable to equity holders of RMB 1,298 million for the three months ended June 30, 2023, compared to RMB 1,100 million in the same period last year, marking a 17.9% increase [19]. User Metrics - Online music subscription revenue increased by 29.4% year-over-year to RMB 3.74 billion (USD 515 million), with the number of paid users growing by 17.7% to 117 million, and a net increase of 3.5 million users quarter-over-quarter [3]. - Monthly active users for online music services decreased by 3.9% year-over-year to 571 million, while mobile monthly active users for social entertainment services dropped by 31.6% to 93 million [5]. - The number of online music paying users increased by 17.7% year-over-year to 117 million, with an average revenue per paying user of RMB 10.7 [8]. Cash and Investments - As of June 30, 2024, the total balance of cash, cash equivalents, time deposits, and short-term investments was RMB 35.03 billion (USD 4.82 billion) [3]. - Cash and cash equivalents totaled RMB 35.03 billion (USD 4.82 billion) as of June 30, 2024, up from RMB 34.18 billion [12]. - The company reported cash and cash equivalents of RMB 12,251 million as of June 30, 2024, down from RMB 13,567 million as of December 31, 2023 [22]. - The net cash outflow from investing activities for the six months ended June 30, 2024, was RMB 4,805 million, compared to an outflow of RMB 528 million for the same period in 2023 [24]. Operating Expenses - Operating expenses decreased by 8.5% year-over-year to RMB 1.15 billion (USD 158 million), with a reduction in general and administrative expenses by 10.2% [9]. - The total operating costs for the three months ended June 30, 2023, were RMB 7,286 million, a slight decrease from RMB 7,300 million in the same period last year [18]. Future Outlook - The company expects continued growth in online music services and anticipates a recovery in social entertainment services in the upcoming quarters [17]. - The company plans to continue expanding its market presence and investing in new technologies and products to drive future growth [20]. Shareholder Returns - The company declared a cash dividend of USD 0.0685 per ordinary share, totaling USD 212 million, to be paid on June 2024 [11]. Asset and Liability Overview - The total assets of Tencent Music as of June 30, 2024, were RMB 82,405 million, an increase from RMB 75,536 million as of December 31, 2023 [22]. - Total liabilities increased to RMB 19,526 million as of June 30, 2024, from RMB 18,334 million as of December 31, 2023 [23]. - The company’s equity attributable to shareholders was RMB 62,879 million as of June 30, 2024, up from RMB 57,202 million as of December 31, 2023 [23].

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The company is expected to see a continuous increase in paid music subscriptions and ARPU, leading to an improvement in profit margins. The net profit forecasts for 2024, 2025, and 2026 are projected to be 6.6 billion, 8 billion, and 9.4 billion CNY respectively, reflecting an upward revision due to increased membership and gross margin expectations [5] - The company reported Q1 2024 revenue of 6.77 billion CNY, a year-over-year decrease of 3.4% and a quarter-over-quarter decrease of 1.8%. The Q2 revenue is anticipated to reach 7.38 billion CNY, showing a year-over-year increase of 1.3% and a quarter-over-quarter increase of 9.1% [4][6] - The online music service revenue for Q1 2024 was 5.01 billion CNY, a year-over-year increase of 43.0%. The company expects Q2 revenue from this segment to be 5.67 billion CNY, a year-over-year increase of 33.5% [4][6] Financial Summary - Revenue for 2022 was 28,339 million CNY, with a projected increase to 29,449 million CNY in 2024, reflecting a year-over-year growth of 6.1% [4] - The gross profit margin is expected to improve from 35.3% in 2023 to 42.0% in 2024, while the net profit margin is projected to rise from 17.7% to 22.5% in the same period [4] - The company’s earnings per share (EPS) is forecasted to increase from 1.43 CNY in 2023 to 1.93 CNY in 2024 [4] Market Performance - The company's stock has shown strong performance with a 12-month absolute return of 107.72% and a relative performance of 110.54% compared to the Hang Seng Index [2]

Revenue Performance - Total revenue for Q1 2024 was RMB 6.77 billion (USD 937 million), a decrease of 3.4% YoY, primarily due to declines in social entertainment and other services, partially offset by strong growth in online music service revenue[2] - Online music service revenue increased to RMB 5,007 million in Q1 2024, up 43% from RMB 3,501 million in Q1 2023[16] - Social entertainment service and other service revenue decreased to RMB 1,761 million in Q1 2024, down 50% from RMB 3,503 million in Q1 2023[16] - Social entertainment and other service revenue decreased by 49.7% YoY to RMB 1.76 billion (USD 244 million), primarily due to adjustments in live interaction features and stricter compliance procedures since Q2 2023, as well as competition from other platforms[7] User Metrics - Online music subscription revenue reached RMB 3.62 billion (USD 501 million), a 39.2% YoY increase, driven by a 20.2% YoY growth in paying users to 113.5 million, with a net addition of 6.8 million users, the highest quarterly net increase to date[2] - Monthly active users (MAU) for online music services were 578 million, a 2.4% YoY decrease, while mobile MAU for social entertainment services dropped 28.7% YoY to 97 million[4] - Average revenue per paying user (ARPPU) for online music services increased 15.2% YoY to RMB 10.6, while ARPPU for social entertainment services decreased 55.4% YoY to RMB 73.4[4] Profitability - Net profit for Q1 2024 was RMB 1.53 billion (USD 212 million), a 27.5% YoY increase, with non-IFRS net profit at RMB 1.81 billion (USD 251 million), up 23.9% YoY[2] - Net profit for Q1 2024 was RMB 1.53 billion (USD 212 million), with non-IFRS net profit reaching RMB 1.81 billion (USD 251 million)[7] - Net profit attributable to equity holders of the company increased to RMB 1,422 million in Q1 2024, a 24% rise from RMB 1,148 million in Q1 2023[17] - Non-IFRS net profit reached RMB 1,812 million in Q1 2024, up 24% from RMB 1,463 million in Q1 2023[18] - Operating profit increased by 41.9% YoY to RMB 1.96 billion (USD 271 million) in Q1 2024, benefiting from improved operational efficiency and effective cost control[7] - Operating profit grew to RMB 1,959 million in Q1 2024, up 42% from RMB 1,381 million in Q1 2023[16] - Gross margin improved from 33.1% to 40.9% YoY, driven by strong growth in music subscription and advertising service revenue, as well as increased original content[7] - Gross profit rose to RMB 2,771 million in Q1 2024, a 20% increase from RMB 2,315 million in Q1 2023[16] Cash and Financial Position - The company's cash, cash equivalents, and term deposits totaled RMB 34.18 billion (USD 4.73 billion) as of March 31, 2024[2] - Cash, cash equivalents, and term deposits totaled RMB 34.18 billion (USD 4.73 billion) as of March 31, 2024, up from RMB 32.22 billion as of December 31, 2023[8] - Total assets increased to RMB 79,176 million as of March 31, 2024, compared to RMB 75,536 million as of December 31, 2023[20] - Cash and cash equivalents decreased to RMB 10,218 million as of March 31, 2024, down 25% from RMB 13,567 million as of December 31, 2023[20] - Time deposits increased to RMB 16,370 million as of March 31, 2024, up 65% from RMB 9,937 million as of December 31, 2023[20] - Total equity increased from RMB 55,907 million in 2023 to RMB 59,316 million in 2024, representing a growth of 6.1%[21] - Retained earnings rose from RMB 16,969 million in 2023 to RMB 18,391 million in 2024, a growth of 8.4%[21] - Total liabilities slightly increased from RMB 18,334 million in 2023 to RMB 18,421 million in 2024, a growth of 0.5%[21] Shareholder Returns - TME announced a 2023 annual cash dividend of approximately USD 210 million to shareholders of record[2] - The board approved an annual cash dividend policy, declaring a dividend of USD 0.1370 per ADS for 2023, with a total cash dividend payment of approximately USD 210 million[10] - The company repurchased approximately 32.2 million ADSs for about USD 235.5 million under the USD 500 million share repurchase program announced on March 21, 2023[9] Earnings Per Share - Basic and diluted earnings per ADS were RMB 0.92 (USD 0.13) and RMB 0.91 (USD 0.13), respectively, with non-IFRS basic and diluted earnings per ADS at RMB 1.11 (USD 0.15) and RMB 1.09 (USD 0.15), respectively[8] - Basic earnings per ADS grew to RMB 0.92 in Q1 2024, a 24% increase from RMB 0.74 in Q1 2023[17] Tax and Compliance - The effective tax rate for Q1 2024 was 19.9%, up from 12.2% in the same period last year, primarily due to a provision for income tax of RMB 107 million (USD 15 million) and changes in preferential tax rates for certain subsidiaries[7] Operational Costs - Operating costs decreased by 14.8% YoY to RMB 4.0 billion (USD 554 million), mainly due to a decline in revenue-sharing costs corresponding to the decrease in social entertainment service revenue, partially offset by increases in content copyright and payment channel costs[7] Cash Flow - Net cash inflow from operating activities increased from RMB 1,852 million in 2023 to RMB 2,686 million in 2024, a growth of 45%[22] - Net cash outflow from investing activities significantly increased from RMB 811 million in 2023 to RMB 5,498 million in 2024, a growth of 577.9%[22] - Net cash outflow from financing activities increased from RMB 80 million in 2023 to RMB 522 million in 2024, a growth of 552.5%[22] - Net decrease in cash and cash equivalents was RMB 3,334 million in 2024, compared to a net increase of RMB 2,583 million in 2023[22] - Ending cash and cash equivalents decreased from RMB 12,129 million in 2023 to RMB 10,218 million in 2024, a decrease of 15.8%[22] Strategic Initiatives - The company expanded its music library through partnerships with labels like TF Entertainment and HIM International, leveraging AI to enhance user interaction and fan engagement[5] - TME launched an audio large model and tested a new AI assistant to improve music discovery and user interaction, alongside introducing incentive points and interactive features to boost user engagement[6] - The company collaborated with Xiaomi SU7 and hosted the QQ Music Peak Festival to strengthen its core user base and promote in-car music consumption[6]

Share Structure and Voting Rights - Tencent Music Entertainment Group has a dual-class share structure, with Class A shares having one vote per share and Class B shares having fifteen votes per share[3]. - As of April 10, 2024, Tencent holds approximately 92.6% of the voting power through its ownership of 1,640,456,882 Class B shares and 159,996,879 Class A shares[6]. - The total number of outstanding shares is 3,432,154,260, comprising 1,767,205,005 Class A shares and 1,664,949,255 Class B shares[5]. - If all Class B shares were converted to Class A shares, Tencent would issue 1,664,949,255 Class A shares, representing about 94.2% of the total Class A shares outstanding[6]. - Tencent and Min River have committed to converting any Class B shares sold to non-affiliated entities into Class A shares prior to the transfer[7]. - EMI Group Limited holds 24,492,362 Class B shares, accounting for approximately 1.4% of the voting power[4]. - The early investors with nominal interests do not participate in the company's business and operations[6]. - The company has a total of thirteen different voting rights beneficiaries, with eight being early investors holding nominal interests[3]. - The voting rights of 18,581,530 Class A shares held by minority shareholders are also attributed to Tencent[5]. - The company is subject to the Hong Kong Stock Exchange rules regarding its dual-class share structure[3]. - The company has a dual-class share structure, with Tencent holding a significant proportion of voting rights, which may not align with the interests of all shareholders[8]. - The different voting rights structure allows Tencent and Min River to exert greater influence over company affairs and shareholder resolutions[8]. - Any changes in regulations or guidelines from the Hong Kong Stock Exchange could automatically invalidate the different voting rights commitments[8]. - The company emphasizes the potential risks for investors in companies with different voting rights structures, particularly regarding the alignment of interests[8]. Financial Performance and Growth - The company reported a significant increase in monthly active users, with a total of 100 million users across its online music services as of December 31, 2023, representing a 15% year-over-year growth[15]. - The average revenue per paying user for online music services reached RMB 12.50, an increase of 10% compared to the previous year[15]. - The paying user base for social entertainment services grew to 30 million, reflecting a 20% increase year-over-year[15]. - The company achieved a paying user conversion rate of 25% for its online music services, up from 22% in the previous year[15]. - Total revenue for the fiscal year 2023 was RMB 10 billion, marking a 12% increase from RMB 8.93 billion in 2022[15]. - The company anticipates a revenue growth guidance of 15-20% for the fiscal year 2024, driven by user growth and new service offerings[15]. - The company plans to expand its market presence in Southeast Asia, targeting a 30% increase in user acquisition in the region over the next year[15]. - New product launches, including enhanced features for its social entertainment platform, are expected to drive user engagement and revenue growth in 2024[15]. - Research and development investments increased by 15% in 2023, aimed at improving streaming technology and user interface[15]. Regulatory Environment and Compliance - The company faces significant regulatory risks from Chinese authorities that could impact its ability to operate and attract foreign investment[22]. - Recent regulatory developments include the establishment of the National Data Bureau on October 25, 2023, to oversee data security and privacy, impacting companies with significant user data[35]. - The Cybersecurity Review Measures require network platform operators with over 1 million users' personal information to undergo cybersecurity reviews before going public abroad[35]. - The Data Cross-Border Flow Regulations, effective March 22, 2024, mandate security assessments for data processors providing data overseas under certain conditions, including the transfer of personal information of over 1 million individuals[36]. - The China Securities Regulatory Commission issued new rules on February 17, 2023, regarding the overseas issuance of securities, effective March 31, 2023, impacting the listing requirements for companies[37]. - The implementation of the "Trial Measures" introduces uncertainty regarding the company's ability to conduct future financing activities and comply with filing requirements to the China Securities Regulatory Commission (CSRC)[39]. - The CSRC has clarified that companies listed overseas before March 31, 2023, will be considered as existing listed companies and are not required to complete immediate filing procedures[39]. - Regulatory measures on live streaming businesses have been strengthened, including real-name registration and restrictions on user tipping for minors[40]. - The company may need to adapt its growth strategy in response to evolving regulations affecting the social entertainment industry, which could negatively impact its business and financial performance[41]. - The company faces potential adverse effects on its operations and financial condition due to increased regulatory scrutiny on live streaming platforms and hosts[41]. Financial Reporting and Internal Controls - The company is classified as a large accelerated filer under the Securities Exchange Act[11]. - Tencent Music has adopted International Financial Reporting Standards for its financial statements[11]. - The company has submitted all required reports under the Securities Exchange Act in the past 12 months[11]. - Tencent Music is not classified as a shell company[11]. - The company has maintained effective internal controls over financial reporting as per the Sarbanes-Oxley Act[11]. - The report indicates that Tencent Music is not required to submit reports under Section 13 or 15(d) of the Securities Exchange Act[11]. - The company has not made any corrections to previously issued financial statements[11]. - The English version of the annual report takes precedence over the Chinese translation in case of discrepancies[9]. - The company reported effective internal controls over financial reporting as of December 31, 2023, but acknowledges potential future deficiencies[120]. Variable Interest Entities (VIEs) - Tencent Music Entertainment Group operates through variable interest entities due to restrictions on foreign investment in certain sectors in China[19]. - The company relies on contractual arrangements with variable interest entities to guide their economic performance and obtain most of the economic benefits[19]. - The company has a unique structure that allows it to consolidate the financial results of its variable interest entities into its financial statements[19]. - Revenue from variable interest entities accounted for 99.1%, 96.8%, and 96.5% of total net income for 2021, 2022, and 2023 respectively[21]. - As of December 31, 2022, and December 31, 2023, total assets of variable interest entities represented 26.5% and 24.1% of consolidated total assets[21]. - The company faces significant risks if it fails to predict user preferences and provide content that meets user needs, which could adversely affect user acquisition and retention[47]. - The enforceability of contracts with VIEs is uncertain under Chinese law, which may complicate the company's ability to guide VIE activities effectively[130]. - The company relies on contractual arrangements with VIEs for economic benefits, but these arrangements may not provide the same level of control as direct ownership[129]. - Any failure by VIEs or their partners to fulfill contractual obligations could significantly adversely affect the company's operations and financial performance[130]. Taxation and Dividend Distribution - The effective tax rate applied was 25%, leading to a net distribution to shareholders of 67.5% of the available profit[25]. - The company anticipates a potential double taxation scenario that could reduce post-tax income to approximately 50.6% of pre-tax income if certain tax strategies fail[26]. - Future dividend distributions will be determined by the board based on operational performance, cash flow, and other relevant factors[24]. - The company has not declared or paid any cash or stock dividends on its Class A ordinary shares or American depositary shares[24]. - Chinese subsidiaries must allocate at least 10% of their after-tax profits to statutory reserves until the total reaches 50% of their registered capital, potentially limiting available distributable profits for dividends[33]. - The company’s ability to pay dividends to shareholders and U.S. depositary share holders is contingent on the dividends paid by its Chinese subsidiaries, which face restrictions under Chinese laws[33]. Market Competition and Strategic Positioning - The competitive landscape of the online music and audio entertainment industry in China is a significant factor for the company's strategy[19]. - The company is focused on increasing revenue and managing content-related costs to improve operating profit margins[19]. - The company is exploring strategic acquisitions to bolster its content library and enhance user experience, with a focus on local music labels[15]. - The company faces significant competition globally, which raises the likelihood of facing intellectual property claims[60]. - The company relies on popular live streamers and key opinion leaders to attract user engagement, which is critical for maintaining platform appeal[74]. - The company is actively seeking non-exclusive partnerships with upstream copyright holders following regulatory mandates[71]. - The company is negotiating the renewal of its framework agreement with the music rights organization, which has expired, and this could affect its ability to secure favorable licensing agreements[65]. User Engagement and Content Strategy - The company’s live streaming service revenue primarily comes from the sale of virtual gifts, and recent regulatory scrutiny in China may negatively impact monetization opportunities[66]. - The company introduced a paid streaming model for its online music service in Q1 2019 and continues to increase the number of songs under this model, but future success is not guaranteed[66]. - The company must continuously provide high-quality user experiences and introduce attractive content to increase paid user numbers and willingness to pay[66]. - The company has invested heavily in content acquisition and production, but may struggle to find appealing content or recover investments in this area[55]. - The company faces potential legal liabilities if it fails to act promptly upon receiving proper notifications from rights holders regarding infringing content[58]. - The company has implemented comprehensive measures to reduce the likelihood of using or providing content without proper permissions, including requiring users to confirm they will not upload infringing content[58]. Cybersecurity and Data Protection - The company must conduct regular risk assessments of its data processing activities and report findings to regulatory authorities as mandated by the Data Security Law[93]. - The implementation of the "Cybersecurity Review Measures" on February 15, 2022, expands the scope of cybersecurity reviews to include network platform operators handling personal information of over 1 million users[95]. - The "Personal Information Protection Law" effective from November 1, 2021, consolidates various rules regarding personal information rights and privacy protection applicable to data processing activities within mainland China[94]. - The company has implemented measures to protect user data, but cannot guarantee absolute security against unauthorized access or data breaches[91]. - Compliance with evolving cybersecurity, information security, and data protection laws may be costly and could necessitate unfavorable changes to the company's operations[91]. Economic and Market Conditions - Future business development and financial performance are expected to be influenced by macroeconomic conditions in China and globally[19]. - The global macroeconomic environment remains challenging, with uncertainties stemming from geopolitical tensions and economic policies in major economies[103]. - Economic challenges in China or globally could have a significant adverse impact on the company's business and financial condition[48]. - The fluctuation of the RMB against the USD and other currencies may significantly adversely affect the company's operating performance and investment value[155]. - The company is exposed to risks from potential deposit losses and systemic failures in financial institutions, which could impact overall economic stability[104]. Legal and Litigation Risks - The company is involved in ongoing litigation and regulatory scrutiny that could distract management from daily operations and require substantial cash payments for settlements or damages[86]. - The company may face significant adverse impacts on its business, financial condition, operating performance, cash flow, and reputation due to potential collective securities lawsuits involving its directors and senior management[87]. - The company cannot guarantee that its insurance will cover all or part of the defense costs related to ongoing litigation[87]. - The company faces potential penalties and adverse effects on its business and financial condition if it fails to comply with ESG-related regulations[121]. - The company may face significant losses if its securities are delisted from the NYSE or if it fails to submit timely financial reports as required by the SEC[171]. Strategic Partnerships and Collaborations - The company is seeking long-term partnerships with content collaborators, including cooperation with other Tencent ecosystem companies in the pan-entertainment sector[90]. - The company heavily relies on its strategic partnership with Tencent, which holds 92.6% of the voting power, and any negative developments in Tencent's market position could impact the company's business[123]. - Tencent's brand recognition and user base significantly enhance the company's reputation and marketing effectiveness, making it vulnerable to any negative publicity related to Tencent[123]. - The company may need to seek alternative partnerships if it cannot maintain favorable terms with Tencent, potentially impacting its operational capabilities[123]. Shareholder and Investor Relations - The trading prices of the company's American depositary shares and Class A ordinary shares may experience volatility, potentially leading to significant losses for investors[53]. - The dual-class voting structure limits the influence of Class A common stock and American Depositary Share holders on company matters, granting significant power to certain shareholders[54]. - The sale or potential sale of a large number of Class A common stock and/or American Depositary Shares may adversely affect their trading price[54]. - The company’s ability to attract and retain key personnel may be affected by the increase in share-based compensation expenses[119]. - The company has authorized a total of 436,999,865 shares for equity incentive plans, with 44,799,126 restricted stock units and options for 42,048,774 Class A ordinary shares granted but not exercised as of April 10, 2024[119].

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of HKD 43.74 (CNY 39.67) for 2024 [2][4]. Core Insights - In Q4 2023, the company's revenue was CNY 6.89 billion, representing a year-over-year decline of 7.2% but a quarter-over-quarter increase of 4.9%. For Q1 2024, revenue is expected to reach CNY 6.5 billion, reflecting a year-over-year decline of 7.3% and a quarter-over-quarter decrease of 5.8% [1]. - The gross margin for Q4 2023 was 38.3%, an increase of 5.4 percentage points year-over-year and 2.7 percentage points quarter-over-quarter, driven by strong growth in music subscription and advertising services [1]. - The adjusted net profit for Q4 2023 was CNY 1.58 billion, showing a year-over-year increase of 9.5% and a quarter-over-quarter increase of 11.9% [1]. Revenue Breakdown - Online music services generated CNY 5.02 billion in Q4 2023, a year-over-year increase of 41.1% and a quarter-over-quarter increase of 10.3%. The revenue for Q1 2024 is projected to be CNY 4.79 billion, with an expected annual growth of 25% for 2024 [1]. - Social entertainment services generated CNY 1.87 billion in Q4 2023, a significant year-over-year decline of 51.7% and a quarter-over-quarter decline of 7.2%. The revenue for Q1 2024 is expected to be CNY 1.71 billion, with an anticipated annual decline of 34% for 2024 [1]. Financial Forecasts - The company’s net profit is projected to be CNY 4.9 billion in 2023, CNY 5.7 billion in 2024, and CNY 6.9 billion in 2025, reflecting adjustments in tax rate assumptions [2]. - The report anticipates continued improvement in profit margins due to the increasing share of paid music subscriptions and ARPU growth [2]. Key Financial Metrics - The company’s revenue for 2023 is estimated at CNY 27.75 billion, with a projected growth of 3.0% in 2024 and 6.0% in 2025 [3]. - The gross margin is expected to improve from 35.3% in 2023 to 40.4% in 2024 and 43.1% in 2025 [3]. - The net profit margin is projected to increase from 17.7% in 2023 to 19.9% in 2024 and 22.7% in 2025 [3].

[Table_Page] 公告点评|媒体Ⅱ 证券研究报告 [【Table_广Title] 发传媒&海外】腾讯音乐(TME)/ 公[Ta司ble评_In级ves t] 买入-美股/买入-H 当前价格 11.69美元/44.40港元 腾讯音乐-SW(01698.HK) 合理价值 13.16美元/51.45港元 前次评级 买入/买入 自制音乐占比提升带动毛利率持续优化 报告日期 2024-03-21 [ 核Tab 心le_S 观umm 点ary ：] 相[Ta对ble市_P场icQ表uot现e]  公司发布23Q4季报：23Q4总收入达到68.9亿元，YoY/QoQ -7%/+5%， 40% 30% vs.一致预期为 67 亿元（超 3%）。23Q4 毛利率为 38.3%, YoY/QoQ 20% 10% +5.4pct/+2.7pct 。 NonGAAP 归 母 净 利 润 为 15.75 亿 元 ， 0% -10% YoY/QoQ+10%/+12%，vs.一致预期为 15.55 亿元。23Q4 归母净利润 -20% 率为22.8%，YoY+3.5pct/QoQ+1.4cpt。 -30% SPX Index T ...

香港交易及結算所有限公司及香港聯合交易所有限公司對本公告的內容概不負責，對其準確性或完整性亦不發表 任何聲明，並明確表示概不就因本公告全部或任何部分內容而產生或因依賴該等內容而引致的任何損失承擔任何 責任。 Tencent Music Entertainment Group 騰訊音樂娛樂集團 （於開曼群島註冊成立以不同投票權控制的有限責任公司） （港交所股份代號：1698） （紐交所股份代號：TME） 2023 年 第 四 季 度 及 全 年 未 經 審 計 財 務 業 績 公 告 我們謹此公佈我們截至2023年12月31日止三個月及全年的未經審計業績（「2023年第四季 度及全年業績公告」）。2023年第四季度及全年業績公告可於香港聯合交易所有限公司網 站 www.hkexnews.hk 及本公司網站 https://ir.tencentmusic.com 查閱。 承董事會命 騰訊音樂娛樂集團 執行董事長 彭迦信 香港，2024年3月19日 於本公告刊發日期，本公司董事會由董事彭迦信先生、梁柱先生、謝振宇先生、James Gordon Mitchell先生、 Brent Richard Irvin先生及鄭潤 ...