Core Viewpoint - Tencent Music's board of directors will review and vote on the company's unaudited performance for the three months ending March 31, 2025, on May 12, 2025 [1] Group 1 - The board meeting is scheduled for May 12, 2025 [1] - The meeting will include the review of the first quarter performance announcement [1]

港股午评：恒指收跌1.55% 芯片股回暖 中芯国际涨7% 金十数据4月9日讯，港股早盘大幅低开，随后拉升走高跌幅收窄，恒指收跌1.55%，报19815.24点；科 指收跌0.96%，报4524.62点。盘面上，中船系大涨，内房股拉升，芯片股强势，油气股下跌，医药股走 低。个股方面，中船防务(00317.HK)涨15.88%，融创中国(01918.HK)涨12.6%，中芯国际(00981.HK)涨 超7%，小米集团(01810.HK)涨3%，腾讯音乐(01698.HK)、蔚来汽车(09866.HK)跌超6%，联想集团 (00992.HK)跌6%领跌蓝筹股，中国石油股份(00857.HK)跌超5%。南向资金半日净买额达175亿元。 ...

Investment Rating - The report maintains a "Buy" rating for Tencent Music [5] Core Views - The company is expected to see continuous improvement in online music revenue and profit margins due to the growth in paid users and ARPPU [2] - The forecasted net profits for the years 2024 to 2026 are 6.644 billion, 7.645 billion, and 9.133 billion CNY respectively, with a target price set at 66.89 HKD [2][5] Financial Performance Summary - For 2024, the company anticipates total revenue of 28.401 billion CNY, with a year-on-year growth of 2.3% [12] - The operating profit for 2024 is projected to be 7.349 billion CNY, reflecting a significant year-on-year increase of 53.8% [12] - The net profit attributable to the parent company for 2024 is expected to be 6.644 billion CNY, with a year-on-year growth of 35.0% [12] - The gross margin is forecasted to improve to 42.3% in 2024, up from 35.3% in 2023 [12] - The net margin is projected to reach 23.4% in 2024, compared to 17.7% in 2023 [12] - The company’s P/E ratio for 2025 is estimated at 26.1 times [12] Revenue Breakdown - In Q4 2024, the online music service revenue is expected to be 58.3 billion CNY, showing a year-on-year increase of 16.1% [9] - The social entertainment service revenue for Q4 2024 is projected at 16.3 billion CNY, a decrease of 13.0% year-on-year [9] - The total revenue for 2025 is anticipated to reach 310 billion CNY, reflecting a year-on-year growth of 9% [9]

Investment Rating - The report maintains a "Buy" rating for Tencent Music [5] Core Views - The company is expected to see continuous improvement in online music revenue and profit margins due to the growth in paid users and ARPPU [2] - The projected net profits for the years 2024 to 2026 are 66 billion, 76 billion, and 91 billion CNY respectively, with a target price set at 66.89 HKD [2] Financial Performance Summary - For 2024, the company anticipates revenue of 28.4 billion CNY, reflecting a year-on-year growth of 2.3% [12] - The operating profit for 2024 is projected to be 7.35 billion CNY, with a significant year-on-year increase of 53.8% [12] - The net profit attributable to the parent company for 2024 is expected to reach 6.64 billion CNY, marking a 35% increase year-on-year [12] - The gross margin is forecasted to improve to 42.3% in 2024, up from 35.3% in 2023 [12] - The net margin is projected to rise to 23.4% in 2024, compared to 17.7% in 2023 [12] - The return on equity (ROE) is expected to be 10.7% in 2024, increasing from 9.5% in 2023 [12] Revenue Breakdown - Online music service revenue for Q4 is reported at 58.3 billion CNY, showing a year-on-year increase of 16.1% [9] - Social entertainment service revenue for Q4 is 16.3 billion CNY, reflecting a year-on-year decrease of 13% [9] - The company expects total revenue for 2025 to reach 310 billion CNY, representing a year-on-year growth of 9% [9] User Metrics - The monthly active users (MAU) for Q4 stand at 560 million, a decrease of 3.5% year-on-year [9] - The monthly paying users (MPU) reached 120 million, an increase of 13.4% year-on-year [9] - The average revenue per paying user (ARPPU) is reported at 11 CNY per month, with expectations for it to rise to 11.3 CNY in Q1 2025 [9]

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the online music industry, specifically analyzing the competitive landscape and performance of leading companies Tencent Music and NetEase Cloud Music [2][3][4]. Core Insights and Arguments 1. **Market Growth**: The online music market in China is projected to reach 20 billion RMB in 2024, with Tencent Music capturing over 15 billion RMB (26% growth YoY) and NetEase Cloud Music nearing 5 billion RMB (over 20% growth YoY) [3][6]. 2. **Competitive Landscape**: The market is characterized by a "one strong, one leading" structure, with Tencent Music holding 60-70% market share and NetEase Cloud Music 20-30%, indicating a stable competitive environment [3][6]. 3. **User Metrics**: As of the end of 2024, Tencent Music has a total MAU of 570 million and 120 million paying users (21% conversion rate), while NetEase Cloud Music has over 200 million MAU and 50-60 million paying users (over 25% conversion rate) [3][10]. 4. **Content Differentiation**: Tencent Music excels in K-pop licensing, while NetEase Cloud Music appeals to younger audiences with niche genres, highlighting the importance of content differentiation in competition [3][9]. 5. **Future Growth Potential**: The paid user rate in China's online music market is expected to reach 30-35%, translating to 250-300 million subscribers, indicating significant growth potential [3][12]. 6. **Profitability Forecast**: Tencent Music's adjusted profit is expected to reach 9 billion RMB in 2025 (17% growth), while NetEase Cloud Music's profit is projected at around 2 billion RMB, with both companies having room for valuation increases [3][23]. 7. **ARPU Trends**: Tencent Music's ARPU is 10.8 RMB, expected to rise to 11.8 RMB in 2025, driven by premium memberships. In contrast, NetEase Cloud Music's ARPU is below 7 RMB, necessitating strategic improvements to enhance revenue per user [13][20]. Additional Important Insights 1. **Cost Optimization**: Both companies have improved their gross margins through copyright cost optimization and increased self-produced content, with Tencent Music's gross margin at 42% and NetEase Cloud Music at 34% [16][20]. 2. **Non-Subscription Revenue**: Non-subscription revenue is performing well, with NetEase Cloud Music's non-subscription business growing by 28% and Tencent Music by 25%, indicating a shift towards ad-supported models [22]. 3. **Valuation Outlook**: Tencent Music is expected to have a valuation of around 19 times earnings, while NetEase Cloud Music is projected at less than 15 times, reflecting their respective market positions and growth prospects [24][25]. 4. **Future Challenges**: Both companies face challenges in maintaining user engagement and monetization strategies, particularly in light of regulatory changes affecting social entertainment segments [21][26]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the online music industry's current state and future outlook.

Investment Rating - The report maintains a "Buy" rating for Tencent Music (TME) with a current price of $15.09 and a fair value of $16.36 [9][40]. Core Insights - The report highlights that Tencent Music's profit performance exceeded expectations, balancing membership growth and ARPU (Average Revenue Per User) [3][9]. - The company is expected to continue enhancing its SVIP (Super VIP) membership scale and ARPU, leading to steady revenue growth [9][34]. - The online music revenue for Q4 2024 was reported at 58.31 billion RMB, showing a year-over-year increase of 16% [9][34]. Financial Performance Summary - **Revenue Forecast**: - 2023A: 27,752 million RMB - 2024A: 28,401 million RMB (growth rate: 2.3%) - 2025E: 30,973 million RMB (growth rate: 9.1%) - 2026E: 35,313 million RMB (growth rate: 14.0%) - 2027E: 38,160 million RMB (growth rate: 8.1%) [4] - **Net Profit Forecast**: - 2023A: 5,923 million RMB - 2024A: 7,671 million RMB (growth rate: 29.5%) - 2025E: 8,699 million RMB (growth rate: 13.4%) - 2026E: 10,359 million RMB (growth rate: 19.1%) - 2027E: 11,645 million RMB (growth rate: 12.4%) [4] - **EPS and Valuation Ratios**: - EPS for 2025E is projected at 5.58 RMB, with a P/E ratio of 21.60 [4]. - The report anticipates a continuous improvement in gross margin, reaching 45.1% and 47.4% in 2025 and 2026, respectively [35]. Business Segment Performance - **Online Music Business**: - Expected to generate revenues of 252.31 billion RMB and 298.59 billion RMB in 2025 and 2026, respectively, with growth rates of 16% and 18% [34]. - The net profit margin for the online music segment is projected to be 27% and 29% for 2025 and 2026 [36]. - **Social Entertainment Business**: - Revenue is expected to decline, with projections of 57.42 billion RMB and 54.55 billion RMB for 2025 and 2026, reflecting a year-over-year decrease of 14% and 5% [34][36]. Valuation Analysis - The fair value of Tencent Music is calculated at $16.36 per ADS, based on a segmented valuation approach [40]. - The online music business is valued at 28x P/E, while the social entertainment business is valued at 9x P/E [41].

Investment Rating - The report maintains a "Buy" rating for Tencent Music (TME.US/1698.HK) and raises the target price to $18 or HKD 70, indicating a potential upside of 19% from the current price of $15.09 [3][5]. Core Insights - Tencent Music's Q4 2024 revenue reached RMB 74.6 billion, a year-on-year increase of 8.2%, surpassing market expectations by 2.4%, primarily driven by better-than-expected social entertainment service revenue [1]. - The adjusted net profit for Q4 2024 was RMB 22.8 billion, exceeding market expectations of RMB 19.4 billion, attributed to improved gross profit and optimized operating expenses [1]. - The online music service revenue grew by 16.1% year-on-year in Q4 2024, supported by subscription and advertising revenue growth [2]. - The report forecasts continued growth in subscription revenue, with an expected ARPU increase to nearly RMB 12 by Q4 2025 [2]. - Social entertainment service revenue showed a sequential recovery, with a 6.0% increase quarter-on-quarter, although it still faced a year-on-year decline of 13.0% [2]. Financial Projections - The report projects the following financial metrics for Tencent Music: - FY24 revenue: RMB 28,401 million - FY25E revenue: RMB 30,817 million - FY26E revenue: RMB 34,176 million - FY27E revenue: RMB 37,711 million - Adjusted net profit for FY25E: RMB 8,627 million [4][10]. - The adjusted net profit margin is expected to improve, with FY25E and FY26E adjusted net profit margins projected at 28.0% and 28.5%, respectively [10].

Investment Rating - The investment rating for Tencent Music is "Buy" [7][11]. Core Views - The report highlights that Tencent Music's Q4 2024 performance exceeded expectations, driven by robust growth in paid user numbers and an increase in ARPPU (Average Revenue Per Paying User) [2][4]. - The company is expected to maintain its leading position in the industry, with strong integration capabilities and potential for margin expansion [3][4]. Summary by Sections Financial Performance - In Q4 2024, Tencent Music reported revenue of RMB 74.6 billion, a year-on-year increase of 8.2%, and an adjusted net profit of RMB 24 billion, up 43% year-on-year [1][4]. - Online music revenue grew by 16% to RMB 58.3 billion, with subscription revenue increasing by 18% to RMB 40.3 billion [2]. User Growth and ARPPU - The number of online paying users increased by 13.4% year-on-year to 121 million, aligning with expectations [2]. - ARPPU rose to RMB 11.1, reflecting a sequential increase driven by strong growth in SVIP (Super VIP) memberships [2][3]. Profitability and Margin Outlook - The gross margin for Q4 2024 was 43.6%, an increase of 5.3 percentage points year-on-year [3]. - The report anticipates further improvement in gross margin to 45% by 2025, supported by growth in paid users and a decrease in revenue share from live streaming [3]. Valuation and Target Price - The adjusted net profit forecasts for 2025-2027 have been raised to RMB 86.7 billion, RMB 95.4 billion, and RMB 107.4 billion, respectively [4][11]. - The target price is set at USD 19.10 or HKD 68.43, based on a 25x PE multiple for 2025 [4][11].

Core Viewpoint - Goldman Sachs sets a 12-month target price of HKD 52.6 for Tencent Music (01698) and maintains a "Buy" rating, highlighting strong financial performance and user growth [1][2]. Financial Performance - Tencent Music's gross margin reached a historical high of 43.6%, up 5 percentage points year-on-year and 1 percentage point quarter-on-quarter, exceeding Goldman Sachs' expectation of 42.9% [1][2]. - Operating profit margin increased by 8 percentage points year-on-year and 3.5 percentage points quarter-on-quarter, indicating robust operational efficiency [1]. - The company reported a quarterly net addition of 2 million subscription users, with average revenue per user (ARPU) showing quarter-on-quarter growth [1][3]. - Total operating expenses decreased by 7% year-on-year and 4% quarter-on-quarter, reaching the lowest level since Q2 2019, attributed to effective control over general and administrative expenses and R&D costs [1]. User Growth and Revenue - For Q4 2024, Tencent Music's revenue slightly exceeded expectations with an 8% year-on-year growth, driven by a 16% increase in online music service revenue and strong performance in social entertainment [2]. - The adjusted net profit grew by 45% year-on-year, surpassing market expectations by 18%, with growth accelerating compared to previous quarters [2]. Future Outlook - The target for Q1 2025 is to add over 2 million subscription users, with a focus on balancing user growth and ARPU [3]. - The gross margin is close to the company's mid-term target of 45%, with potential for further improvement through operational leverage and revenue share enhancement [3]. - The company aims to leverage artificial intelligence to personalize services and enhance user experiences [3]. Shareholder Returns - Tencent Music announced a dividend of USD 0.18 per American Depositary Share (ADS) for 2024, a 30% increase from the 2023 fiscal year, and approved a new stock buyback plan of up to USD 1 billion over 24 months starting March 2025 [4].

Core Viewpoint - Tencent Music's Q4 2024 earnings report shows mixed results, with subscription growth under pressure but improved profitability and cost management, indicating potential for future growth despite competitive challenges [1][7]. Subscription Performance - The number of subscription users increased by 2 million in Q4, remaining flat compared to Q3, which aligns with previous guidance [1]. - Subscription revenue grew by 18% year-over-year, driven by an increase in average revenue per paying user (ARPPU) [3][14]. - The company aims to increase its subscription penetration rate to 25%-30%, currently at 21.8% [17]. Profitability and Cost Management - Operating income for the core business reached 2.079 billion CNY, exceeding market expectations, with an operating profit margin of 27.9% [5][21]. - The gross profit margin improved to 43.6%, reflecting effective cost management and operational efficiency [20][21]. - Non-IFRS net income for Q4 was 2.399 billion CNY, a 43% year-over-year increase, primarily due to favorable currency fluctuations [22]. Shareholder Returns - A new share buyback plan of 1 billion USD over two years and a dividend of 273 million USD for 2024 were approved, resulting in a shareholder return yield of 3.5% [2][3]. Competitive Landscape - Monthly active users (MAU) decreased by 20 million to 556 million, raising concerns about competition, particularly from competitors like Kuaishou Music [2][12]. - Kuaishou Music's MAU has surged to nearly 100 million, indicating a significant competitive threat [8][13]. Cash Position - As of the end of Q4, Tencent Music had a net cash position of 25 billion CNY (approximately 3.5 billion USD), which could be utilized for shareholder returns and potential investments [4][23].