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].

北京时间 3 月 18 日港股盘后、美股盘前，腾讯音乐发布了 2024 年第四季度财报。 由于之前给的订阅指引较差，且降本增效的拉动 渐进 尾声，因此在市场预期中，腾讯音乐的短期基本面是乏善可陈的。这也导致在这一轮中概重估中，腾讯音乐 从低点至今累计近 30% 的涨幅在同行中其实是偏落后的。 那么，四季度财报实际怎样？是否透露出一些新的机会或风险？ 具体来看： 1. 订阅数 "如期" 承压： 短期基本面最被市场在意的问题——音乐订阅用户数，确实如指引一般，还是承压状态。四季度净增订阅用户 200 万人，和三季度持平。 电话会上管理层预计会透露一些年初至今的表现，以及 2025 年的订阅数增长目标，可以重点关注下。 2. 盈利能力再造惊喜： 为了剔除利息、投资收益的影响，海豚君主要看核心主业的经营利润（Non-IFRS 下 beat 显著主要是非经营项目带来）。Q4 超出一致预期 近 2 亿，经营利润率超了 2pct。 由于商业模式和竞争相对稳态，海豚君从不怀疑腾讯音乐的赚钱能力。但这次海豚君比较惊讶的是，除了毛利率一如我们预期，持续稳步提升外， 经营费用还能 进一步压缩 （Q4 三费均加快同比下滑）。这除了商 ...

Core Viewpoint - Tencent Music Entertainment Group has demonstrated steady growth, becoming a focal point for investors following the release of its latest financial results, which show a dual increase in revenue and net profit, indicating resilience and robust development [1][2]. Financial Performance - For the fiscal year 2024, Tencent Music reported total revenue of 28.4 billion RMB, a year-on-year increase of 2.3%, and a net profit of 8.14 billion RMB, reflecting a growth of 30.7% [1]. - In the fourth quarter, total revenue reached 7.46 billion RMB, up 8.2% year-on-year, with adjusted net profit increasing by 43% to 2.4 billion RMB [2]. User Growth and Revenue Drivers - The number of online music paying users grew by 13.4% year-on-year to 121 million, with average revenue per paying user (ARPPU) rising to 11.1 RMB [3]. - Online music subscription revenue for the fourth quarter increased by 17.9% to 4.03 billion RMB, driven by the growth in paying users and ARPPU [3]. Strategic Initiatives - Tencent Music's "content and platform dual-wing" strategy has been pivotal in driving growth, enhancing user engagement through diverse content offerings and improved platform functionalities [4][5]. - The company has strengthened partnerships with record labels and expanded its content library, including collaborations with major entertainment companies and classic artists [4][5]. Market Position and Valuation - Tencent Music's business model, which has achieved profitability earlier than similar platforms like Spotify, positions it favorably for future growth, particularly in user penetration and ARPPU [7]. - The announcement of a cash dividend of approximately 273 million USD and a stock buyback plan of up to 1 billion USD over the next 24 months underscores the company's strong financial health and management's confidence in future growth [7][8]. Investor Sentiment - Several brokerage firms have issued positive ratings for Tencent Music, highlighting its robust operational strategies and predictable performance, which enhance investor confidence [6][8].

Financial Data and Key Metrics Changes - In Q4 2024, total revenues reached RMB 7.5 billion, an 8% year-over-year increase [21] - Online music revenues increased by 16% year-over-year to RMB 5.8 billion, driven by strong growth in music subscription revenues [22] - Net profit increased by 47% year-over-year to RMB 2.1 billion, marking the highest quarterly profit in the company's history [21][26] - Non-IFRS net profit rose by 43% year-over-year to RMB 2.4 billion [27] Business Line Data and Key Metrics Changes - Music subscription revenues in Q4 2024 reached RMB 4 billion, representing an 18% increase year-over-year [22] - The number of online music paying users was 121 million, a 13% increase year-over-year [23] - Advertising revenues achieved strong year-over-year growth, primarily due to the growth in ad-supported model revenues [23] Market Data and Key Metrics Changes - Social entertainment services and other revenues were RMB 1.6 billion, down by 13% year-over-year [24] - The gross margin for Q4 reached 43.6%, an increase of 5.3 percentage points year-over-year [24] Company Strategy and Development Direction - The company is focused on strengthening its business presence across the music value chain and enhancing user experiences through continuous product and service innovation [40] - The dual engine strategy combines rich content and platform innovation to capture emerging opportunities [4] - The company plans to invest in original content production, high-quality content, and innovative technologies globally [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth prospects, expecting healthy growth in online music driven by an increase in paying users and ARPPU [40] - The company aims to explore new business opportunities in content ecosystems, IoT, long-form audio, and international markets [41] - Management noted that the music live shows business in China is expected to continue strong performance, with stable market size and ticket prices [57] Other Important Information - The company announced an annual dividend of $273 million and a new share repurchase program of up to $1 billion [4] - The total revenues for the full year 2024 were RMB 28.4 billion, up by 2% year-over-year [29] Q&A Session Summary Question: Guidance on 2025 growth outlook - Management highlighted strong performance in 2024 and expressed optimism for 2025, focusing on user experience and continuous innovation [40][41] Question: Balance between subscriber and ARPU growth - Management indicated confidence in maintaining growth in both subscriber numbers and ARPU, while being cautious of price sensitivity [51][52] Question: Changes in consumer sentiment towards discretionary spending - Management observed a growing demand for live concerts and music festivals, indicating a positive cycle for music content consumption [56] Question: Strategy around AI in 2025 - Management plans to leverage AI technologies to enhance user experience and improve sound quality, while managing costs effectively [60][62] Question: Sequential revenue growth for social entertainment - Management noted that new interactive features and compliance improvements contributed to recent growth in social entertainment revenue [66][70]

Financial Performance - Total revenue for Q4 2024 was RMB 7.46 billion (USD 1.02 billion), representing an 8.2% year-over-year increase, driven by strong growth in online music services[9]. - Net profit for Q4 2024 was RMB 2.08 billion (USD 284 million), a 47.3% year-over-year increase, while net profit attributable to equity holders rose by 49.8% to RMB 1.96 billion (USD 268 million)[9]. - For the full year 2024, total revenue reached RMB 28.4 billion (USD 3.89 billion), a 2.3% year-over-year increase[9]. - Full year operating profit increased by 43.8% year-over-year to RMB 8.71 billion (USD 1.19 billion)[26]. - Net profit for 2024 is projected at RMB 7.11 billion (USD 974 million), with profit attributable to equity holders of RMB 6.64 billion (USD 910 million)[29]. - Non-IFRS net profit for 2024 is expected to be RMB 8.14 billion (USD 1.12 billion), with basic and diluted earnings per ADS of RMB 4.97 (USD 0.68) and RMB 4.90 (USD 0.67) respectively[29]. Revenue Breakdown - Online music subscription revenue increased by 18.0% year-over-year to RMB 4.03 billion (USD 552 million), with paid user count rising by 13.4% to 121 million[9]. - Online music service revenue grew 16.1% year-over-year to RMB 5.83 billion (USD 799 million), driven by a strong increase in subscription revenue and advertising service revenue[19]. - Online music service revenue increased by 25.5% year-over-year to RMB 21.74 billion (USD 2.98 billion), driven by strong growth in subscription and advertising revenues[7]. - Online music subscription revenue reached RMB 15.23 billion (USD 2.09 billion), a 25.9% increase from RMB 12.10 billion in 2023, supported by a growing user base and higher average revenue per paid user[7]. User Metrics - Monthly active users for online music services decreased by 3.5% year-over-year to 556 million, while mobile monthly active users for social entertainment services fell by 21.2% to 82 million[11]. - The number of online music paying users increased by 13.4% year-over-year to 121 million, benefiting from high-quality content and attractive membership benefits[19]. - The super member business showed strong performance with increased user engagement and average revenue per paid user[10]. - Average revenue per paid user for online music services increased by 3.7% year-over-year to RMB 11.1[11]. Cash and Investments - Cash and cash equivalents, along with short-term investments, totaled RMB 37.58 billion (USD 5.15 billion) as of December 31, 2024[9]. - Cash and cash equivalents totaled RMB 37.58 billion (USD 5.15 billion) as of December 31, 2024, up from RMB 36.04 billion as of September 30, 2024[22]. - The company reported a net cash outflow from investment activities of RMB 6,818 million in 2024, compared to RMB 1,863 million in 2023, indicating a significant increase in investment spending[50]. Dividends and Share Repurchase - The company announced a cash dividend of approximately USD 273 million for the fiscal year 2024 and a new share repurchase plan of up to USD 1 billion[12]. - A cash dividend of USD 0.09 per ordinary share or USD 0.18 per ADS is declared for the 2024 fiscal year, totaling approximately USD 273 million[31]. - The company announced a new share repurchase plan allowing for the buyback of up to USD 1 billion of Class A ordinary shares over a 24-month period starting March 2025[30]. Cost Management - Operating expenses decreased by 7.3% year-over-year to RMB 1.17 billion (USD 161 million), with operating expenses as a percentage of total revenue declining from 18.4% to 15.7%[20]. - Sales and marketing expenses decreased by 3.6% year-over-year to RMB 865 million (USD 119 million), while general and administrative expenses fell by 7.5% to RMB 3.81 billion (USD 522 million) due to reduced personnel costs[28]. Strategic Initiatives - The company plans to leverage AI to enhance personalized services and provide users with fresh music experiences in 2025[10]. - The company has made significant progress in supporting female musicians, with 192,000 women musicians being nurtured within a more diverse and inclusive music community[32]. Asset and Liability Overview - Total assets increased from RMB 75,536 million in 2023 to RMB 90,444 million in 2024, representing a growth of 19.7%[48]. - Total equity increased from RMB 57,202 million in 2023 to RMB 69,726 million in 2024, a growth of 22%[49]. - The company’s total liabilities rose from RMB 18,334 million in 2023 to RMB 20,718 million in 2024, an increase of 13%[49].

Investment Rating - The report maintains a "Buy" rating for Tencent Music (TME) with a target price of 13.75 USD per ADS, equivalent to 53.45 HKD per share [5][54]. Core Views - Tencent Music's Q3 2024 total revenue reached 70.15 billion RMB, showing a year-over-year increase of 7% and a quarter-over-quarter decrease of 2%, slightly above consensus expectations of 70 billion RMB. The Non-GAAP net profit was 18.14 billion RMB, up 29% YoY but down 3% QoQ, with a Non-GAAP net profit margin of 25.9% [2][11]. - The online music business continues to grow steadily, with Q3 2024 revenue of 54.8 billion RMB, a 20% increase YoY and a 1% increase QoQ. Subscription revenue contributed 38.4 billion RMB, also up 20% YoY and 3% QoQ [3][21]. - The company aims to increase its SVIP membership to over 10 million and enhance the Average Revenue Per User (ARPU) value, which is projected to rise to 11 RMB in Q4 2024 [3][45]. Summary by Sections Financial Performance - Q3 2024 total revenue: 70.15 billion RMB, YoY +7%, QoQ -2% [2][11] - Non-GAAP net profit: 18.14 billion RMB, YoY +29%, QoQ -3% [2][11] - Non-GAAP net profit margin: 25.9%, YoY +4.4 percentage points, QoQ -0.3 percentage points [2][11] - Q3 2024 gross margin: 42.6%, slightly above consensus of 42.4%, YoY +7 percentage points, QoQ +0.6 percentage points [3][37]. Business Segments - Online music revenue in Q3 2024: 54.8 billion RMB, YoY +20%, QoQ +1% [3][21] - Subscription revenue: 38.4 billion RMB, YoY +20%, QoQ +3% [3][21] - Non-subscription revenue: 16.4 billion RMB, YoY +20%, QoQ -2% [3][21] - Social entertainment revenue: 15.35 billion RMB, YoY -24%, QoQ -12%, but showing signs of stabilization [34]. Future Projections - Q4 2024 revenue expected to be 73 billion RMB, YoY +6%, with Non-GAAP net profit projected at 20 billion RMB, YoY +29% [3][45]. - Long-term revenue projections for 2024-2025: 282 billion RMB and 311 billion RMB, with growth rates of 1.7% and 10.3% respectively [3][45]. - Expected Non-GAAP net profit for 2024-2025: 74.23 billion RMB and 88.84 billion RMB, with growth rates of 25.3% and 19.7% respectively [3][45].

Investment Rating - The report maintains a "Buy" rating for Tencent Music [4] Core Views - In Q3 2024, Tencent Music reported revenue of 7.02 billion RMB, a year-on-year increase of 6.8% and a quarter-on-quarter decrease of 2.0%. The gross margin improved to 42.6%, up 7.0 percentage points year-on-year and 0.6 percentage points quarter-on-quarter, driven by strong growth in music subscription and advertising service revenues, as well as an increase in original content [1][2] - The online music service revenue reached 5.48 billion RMB in Q3 2024, reflecting a year-on-year growth of 20.4% and a quarter-on-quarter increase of 1.0%. The growth was attributed to high-quality content, attractive membership benefits, optimized user operations, and effective promotional measures. The report anticipates continued revenue growth in Q4, projecting it to reach 5.7 billion RMB [2] - The social entertainment service revenue was 1.54 billion RMB in Q3 2024, showing a decline of 23.9% year-on-year and 11.6% quarter-on-quarter, primarily due to adjustments in live interaction features and increased competition from other platforms [2] Financial Summary - The report forecasts the net profit attributable to the parent company for 2024, 2025, and 2026 to be 6.4 billion RMB, 7.9 billion RMB, and 9.5 billion RMB respectively. The previous estimates were 6.7 billion RMB, 8.2 billion RMB, and 10.2 billion RMB, adjusted due to lower gross margin and interest income [3] - The report sets a target price of 56.37 HKD (52.17 RMB) for Tencent Music, based on a P/E ratio of 28 times for 2024 [3]

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].