Investment Rating - The investment rating for Tencent Music (TME.N) is "Outperform" [1] Core Views - The report highlights that Tencent Music is expanding in the pan-music field, with a successful increase in ARPPU (Average Revenue Per Paying User) [1][4] - The company is expected to maintain a strong position in the subscription business, driven by the growth of ARPPU and an increase in paid user penetration [6][28] - Tencent Music's acquisition of the long audio leader, Ximalaya, is anticipated to enhance synergies between long audio and music, similar to the model of Spotify [6][29] Financial Performance - In Q2 2025, Tencent Music achieved total revenue of 8.44 billion yuan, representing a year-on-year increase of 17.9% and a quarter-on-quarter increase of 14.8% [11][20] - The online music revenue accounted for 81% of total revenue, with a gross margin of 44.4%, up 2.4 percentage points year-on-year [11][20] - Adjusted net profit for Q2 2025 was 2.64 billion yuan, reflecting a year-on-year growth of 33% [11][20] Subscription Business - In Q2 2025, subscription revenue reached 4.38 billion yuan, a year-on-year increase of 17.1% [4][20] - The number of online music paying users was 124 million, with a payment rate of 22.5%, up 2 percentage points year-on-year [4][26] - The monthly ARPPU was 11.7 yuan, showing a year-on-year increase of 9.3% [4][26] Other Online Music Revenue - Other online music business revenue, including advertising and digital albums, grew by 46.9% year-on-year to 2.47 billion yuan [5][20] - The company has seen strong growth in artist-related activities and live performances, including managing large international tours [5][20] Strategic Developments - Tencent Music is actively expanding overseas, including a stake in South Korean SM Entertainment and launching the "Bubble" product for high-end fan services [8][29] - The report suggests that the company is well-positioned to leverage its leading market position and expand its pan-music offerings [6][29] Valuation - The reasonable valuation range for Tencent Music is set at $27.10 to $28.90, reflecting an increase of 66-71% [1][29] - The report uses comparable companies for valuation, indicating a strong growth potential in the pan-entertainment sector [29][30]

Summary of Tencent Music Entertainment (TME) Conference Call Company Overview - **Company**: Tencent Music Entertainment (TME) - **Market Cap**: $41.385 billion (TME US), HK$21.026 billion (TME H) - **Current Price**: $25.60 (as of August 13, 2025) - **Price Target**: Raised to $30.00 (US) / HK$120.00 (June 2026) from $17.00 (December 2025) [3][18][31] Key Industry Insights - **Performance**: TME has shown a 124% stock return year-to-date (YTD), significantly outperforming the KWEB index which returned 24% [1][22]. - **Valuation**: TME is currently trading at a 27x 2026E PE, which is a discount compared to global peers like Spotify (51x) and Netflix (38x) [6][23]. Core Points and Arguments 1. **Investor Sentiment Shift**: There has been a notable change in investor sentiment towards TME's ARPU-driven strategy, contributing to a significant stock return of 87% [1][22]. 2. **Sub-sector Rotation**: The stock has benefited from a rotation from consumer internet stocks to digital entertainment leaders, contributing an additional 37% to stock performance [1][22]. 3. **Narrative Change**: The transition from being perceived as a pure online music distributor to a robust operator of the fan economy is expected to drive further valuation re-rating [1][24][30]. 4. **ARPU Growth**: TME has achieved high single-digit ARPU growth in the first half of 2025, with expectations for acceleration in the second half, which is crucial for sustaining the new narrative [5][22][30]. 5. **Subscriber Growth**: TME reported over 15 million SVIP subscribers by 2Q25, up from approximately 10 million in 3Q24, indicating strong growth potential for blended ARPU [10][23]. Financial Highlights - **Revenue**: TME's net revenues for 2Q25 were RMB 8.442 billion, an 18% increase year-over-year [15]. - **Net Income**: The company reported a net income of RMB 2.409 billion for 2Q25, a 43% increase year-over-year [15]. - **Operating Profit**: Operating profit for 2Q25 was RMB 2.978 billion, reflecting a 35% increase year-over-year [15]. - **Blended ARPU**: Expected to reach RMB 12.2 by the end of 2025, with a year-over-year growth rate of over 10% [23]. Risks and Considerations 1. **Margin Improvement**: Risks include lower-than-expected margin improvements in online music services [26]. 2. **ARPU Expansion**: Potential challenges in achieving anticipated ARPU growth and improvements in the paying ratio for subscriptions [26]. 3. **Competition**: Increased competition in the social entertainment sector could negatively impact margins [26]. 4. **Regulatory Environment**: Stricter regulations could pose additional risks to the business [26]. Conclusion - **Investment Thesis**: TME is positioned for further valuation multiple re-rating due to its evolving narrative, strong operational momentum, and favorable market conditions. The company is expected to maintain its growth trajectory, making it a compelling investment opportunity [24][30].

Group 1 - The report highlights the resilience at the bottom of the cycle, with the successful advancement of the Alashan Phase II project for Boyuan Chemical [4][7] - In H1 2025, the company achieved revenue of 5.92 billion yuan, a year-on-year decrease of 16%, and a net profit of 740 million yuan, down 39% year-on-year [4][5] - The core product prices and gross margins for soda ash declined, but the increase in production and sales volume helped mitigate the impact of price drops [5][6] Group 2 - The company has successfully acquired multiple electronic gas projects, enhancing its position in the electronic gas market [9][10] - In H1 2025, the company reported revenue of 1.114 billion yuan, a year-on-year increase of 14.56%, while net profit decreased by 13.44% [9][10] - The gross margin for H1 2025 was 26.37%, down 3.69 percentage points year-on-year, but operating cash flow increased significantly by 84.34% [10] Group 3 - 361 Degrees reported H1 2025 revenue of 5.7 billion yuan, an increase of 11% year-on-year, with a net profit of 860 million yuan, also up 8.6% [12][13] - The e-commerce segment saw significant growth, with revenue reaching 1.82 billion yuan, a 45% increase year-on-year [13][14] - The company opened 49 new stores, enhancing its retail presence and brand image [15] Group 4 - Tencent Holdings reported Q2 2025 revenue of 184.5 billion yuan, a year-on-year increase of 15%, with a net profit of 55.6 billion yuan, up 17% [17][18] - The gaming segment experienced a robust 22% year-on-year growth, with significant contributions from both domestic and international markets [18][19] - The marketing services business grew by 20% year-on-year, driven by strong demand for advertising within the WeChat ecosystem [19] Group 5 - The report indicates that the chromium salt industry is experiencing significant growth, with Zhihua Co. achieving H1 2025 revenue of 2.19 billion yuan, a 10.2% increase year-on-year [29][30] - The company’s gross margin improved to 28.81%, up 3.16 percentage points year-on-year, reflecting effective cost management [29][30] - The effective release of production capacity contributed to a notable increase in sales volume, particularly in chromium oxide and alloy additives [32][33] Group 6 - Yonghe Co. reported H1 2025 revenue of 2.445 billion yuan, a 12.39% increase year-on-year, with a net profit of 271 million yuan, up 140.82% [35][36] - The refrigerant segment benefited from favorable supply-demand dynamics, leading to a 26.02% increase in revenue [37] - The company is actively pursuing the development of fourth-generation refrigerants and high-end fluorinated fine chemicals [39] Group 7 - The coal industry showed signs of improvement, with July 2025 coal production at 380 million tons, a year-on-year decrease of 3.8% [40][41] - The report notes that the overall coal production growth rate has slowed due to adverse weather conditions and regulatory checks [42] - The performance of major coal companies varied, with some showing production increases while others faced declines [42]

Investment Rating - The report maintains a "Buy" rating for Tencent Music (1698.HK) [1][12][13] Core Views - The report highlights that Tencent Music's revenue and profit growth exceeded expectations, driven by an increase in ARPPU (Average Revenue Per Paying User) and subscription income [5][6][12] - The company is expected to see continued growth in revenue and profitability, supported by a healthy revenue structure and an increase in paying users [12][13] Financial Performance Summary - For Q2 2025, Tencent Music reported revenue of 8.44 billion yuan, a year-over-year increase of 17.9% and a quarter-over-quarter increase of 14.7% [5][6] - The net profit attributable to shareholders was 2.41 billion yuan, reflecting a year-over-year increase of 43.4% [5][6] - The gross profit margin improved to 44.4%, up 2.4 percentage points year-over-year, due to growth in online music revenue and a decrease in revenue sharing from social entertainment services [6][12] User Metrics and Revenue Streams - Online music service revenue reached 6.85 billion yuan, a year-over-year increase of 26.4% [7] - The number of paying users increased to 124 million, a year-over-year growth of 6%, with a paying rate of 22.5% [7] - Advertising and other revenue surged to 2.47 billion yuan, a year-over-year increase of 46.9%, driven by new advertising models and strong growth in artist-related events [7][12] Strategic Initiatives - Tencent Music is enhancing its content ecosystem and interactive community to increase platform value, including hosting major international concerts and introducing interactive community features [8][9] - The company plans to acquire 100% of Ximalaya for $1.26 billion to expand into long audio content, aiming to create a comprehensive entertainment matrix [10][12] Financial Forecast - Revenue projections for 2025-2027 are 32.95 billion yuan, 37.48 billion yuan, and 41.06 billion yuan respectively, with net profit estimates of 10.98 billion yuan, 10.34 billion yuan, and 11.49 billion yuan [11][12] - The adjusted P/E ratios are forecasted to be 30, 24, and 22 for the respective years [12]

Market Overview - The Hang Seng Index (HSI) closed at 25,237.96, down by 32.11 points or 0.13% on August 15 [1] - The index reached a high of 25,311.59 and a low of 25,199.63 during the trading session [1] Major Blue-Chip Stocks Performance - HSBC Holdings closed at HKD 99.966, down 0.33% from the previous close [2] - Tencent Holdings closed at HKD 591.706, down 0.05% from the previous close [2] Stock Price Movements - Tencent Holdings (00700) increased by HKD 2.00, or 0.34%, to HKD 592.00 [3] - Alibaba Group (09988) decreased by HKD 3.70, or 3.04%, to HKD 118.10 [3] - China Construction Bank (00939) fell by HKD 0.18, or 2.26%, to HKD 7.80 [3] - HSBC Holdings (00005) decreased by HKD 0.10, or 0.10%, to HKD 100.30 [3] - Xiaomi Group (01810) dropped by HKD 0.35, or 0.66%, to HKD 52.85 [3] - AIA Group (01299) fell by HKD 1.95, or 2.54%, to HKD 74.95 [3] - Meituan (03690) decreased by HKD 2.70, or 2.17%, to HKD 121.70 [3] - NetEase (099999) dropped by HKD 7.60, or 3.66%, to HKD 200.20 [3] - Hong Kong Exchanges and Clearing (00388) increased by HKD 0.20, or 0.05%, to HKD 439.40 [3] - Industrial and Commercial Bank of China (01398) fell by HKD 0.19, or 3.09%, to HKD 5.96 [3] - Ping An Insurance (02318) decreased by HKD 0.30, or 0.52%, to HKD 57.60 [3] - BYD Company (01211) dropped by HKD 1.00, or 0.88%, to HKD 112.80 [3] - Bank of China (03988) fell by HKD 0.09, or 1.98%, to HKD 4.45 [3] - Kuaishou Technology (01024) decreased by HKD 0.40, or 0.53%, to HKD 74.80 [3] - Ctrip (09961) increased by HKD 1.80, or 0.37%, to HKD 489.00 [3] - Tencent Music (01698) decreased by HKD 0.90, or 0.89%, to HKD 99.90 [3] - BeiGene (06160) increased by HKD 6.50, or 3.51%, to HKD 191.50 [3]

Group 1 - Tencent Music's stock price increased by 2.02% to $26.035 per share, with a total market capitalization of $40.326 billion as of August 15 [1] - As of June 30, 2025, Tencent Music's total revenue is projected to be 15.798 billion RMB, representing a year-on-year growth of 13.43%, while net profit attributable to shareholders is expected to reach 6.7 billion RMB, reflecting a significant year-on-year increase of 115.85% [1] - On August 13, Tencent Music received a "Buy" rating from CMB International, with the target price raised to $29.5 [1] Group 2 - Tencent Music Entertainment Group is a leading online music and audio platform in China, operating popular music products such as QQ Music, Kugou Music, Kuwo Music, and Quanmin Kge [2] - The company provides a comprehensive range of services including online music, audio, karaoke, live streaming, and online performances, creating a large community for music enthusiasts to engage with music through various interactive features [2] - Tencent Music's platform integrates social interactions such as sharing, liking, commenting, and gifting, enhancing user engagement and retention [2] - The company boasts a vast music library, including licensed, self-produced, and co-created content, and offers a wide array of professionally produced video content [2] - Tencent Music collaborates closely with music labels and content owners for copyright protection and empowers artists and performers in creation, distribution, and commercialization [2] - The company's mission is to leverage technology to create limitless possibilities in music [2]

Core Viewpoint - The report maintains a "Buy" rating for Tencent Music with a target price of HKD 118, driven by user growth, improved ARPPU, and strong performance in advertising and concert-related businesses [1] Financial Performance - Tencent Music's revenue for Q2 2025 reached RMB 84.4 billion, a year-on-year increase of 17.9%, with a gross margin of 44.4% [1] - Operating profit was RMB 29.8 billion, up 35.5% year-on-year, with an operating margin of 35.3% [1] - Adjusted net profit for Q2 2025 was RMB 25.7 billion, reflecting a 37.4% year-on-year increase, with an adjusted net margin of 30.5% [1] User Growth and Revenue Streams - The online music service revenue for Q2 2025 was RMB 68.5 billion, a 26.4% increase year-on-year, with subscription revenue at RMB 43.8 billion, up 17.1% [2] - The number of paying users reached 124 million, a 6.3% increase year-on-year, with ARPPU at RMB 11.7, a 9.3% increase [2] - The paid penetration rate reached 22.5%, with SVIP users exceeding 15 million, accounting for 12.1% of paying users [2] Business Expansion and Content Strategy - Tencent Music is expanding its partnerships with domestic and international record companies and artists, including collaborations with The BlackLabel and H Music to enhance K-pop offerings [2] - The company is innovating content production in collaboration with SM Entertainment to promote NCT CHENLE's Chinese EP [2] - Tencent Music provided nearly 300 live performance opportunities for around 100 artists on its platform in the first half of 2025 [3]

Core Viewpoint - The company reported better-than-expected financial results for Q2 2025, driven by strong growth in both subscription and non-subscription revenues, indicating a robust operational performance and positive outlook for future growth [1][2]. Financial Performance - Q2 2025 revenue reached 8.44 billion yuan, a year-on-year increase of 17.9%, surpassing both internal expectations (8 billion yuan) and Bloomberg consensus (7.99 billion yuan) [1]. - Non-IFRS net profit for Q2 2025 was 2.57 billion yuan, up 37.4% year-on-year, exceeding expectations (2.26 billion yuan) and Bloomberg consensus (2.27 billion yuan) [1]. - Gross margin improved by 0.3 percentage points to 44.4% in Q2 2025, with stable sales and management expenses, indicating effective cost control [2]. Revenue Breakdown - Online music revenue for Q2 2025 was 6.85 billion yuan, reflecting a 26.4% year-on-year growth [1]. - Subscription revenue increased by 17% to 4.38 billion yuan, with a rise in paid users by 1.5 million to 124 million, and ARPPU increased by 9.3% to 11.7 yuan/month [1]. - Non-subscription revenue grew by 47% to 2.47 billion yuan, driven by strong performance in advertising, concerts, and artist merchandise [1]. Strategic Developments - The company is enhancing its dual-platform capabilities by deepening partnerships with record labels and hosting concerts, which are expected to drive long-term SVIP penetration [2]. - The introduction of interactive community features on QQ Music aims to increase user engagement with artists, further supporting SVIP conversion [2]. - Potential acquisition of Ximalaya could create significant collaboration opportunities in subscription and advertising [2]. Profit Forecast and Valuation - The company raised its Non-IFRS net profit forecasts for 2025 and 2026 by 6.8% and 13.0% to 9.46 billion yuan and 11.21 billion yuan, respectively [2]. - The target prices for Hong Kong and US stocks were increased by 43.1% and 42.0% to 114.5 HKD and 29.4 USD, respectively, reflecting a positive outlook with significant upside potential [2].

Core Viewpoint - The company reported strong revenue growth in Q2 2025, primarily driven by online music services, despite declines in social entertainment and other service revenues [1][2]. Group 1: Financial Performance - Q2 2025 revenue reached 8.44 billion yuan, representing a year-over-year increase of 17.9% and a quarter-over-quarter increase of 14.8% [1]. - Q2 2025 gross margin was 44.4%, up 2.4 percentage points year-over-year and 0.3 percentage points quarter-over-quarter [1]. - Q2 2025 net profit attributable to shareholders (IFRS) was 2.41 billion yuan, a year-over-year increase of 43.2% but a quarter-over-quarter decrease of 43.9% [1]. - Adjusted net profit (Non-IFRS) for Q2 2025 was 2.57 billion yuan, up 37.4% year-over-year and 21.2% quarter-over-quarter [1]. - For Q3 2025, the company expects revenue to reach 8.26 billion yuan, a year-over-year increase of 17.7% but a quarter-over-quarter decrease of 2.2% [1]. Group 2: Online Music Segment - Q2 2025 online music revenue was 6.85 billion yuan, reflecting a year-over-year increase of 26.4% and a quarter-over-quarter increase of 18.1% [2]. - The company anticipates Q3 2025 online music revenue to be 6.75 billion yuan, a year-over-year increase of 23.2% but a quarter-over-quarter decrease of 1.5% [2]. - Q2 2025 monthly active users (MAU) for online music were 553 million, down 3.2% year-over-year and 0.4% quarter-over-quarter [2]. - Q2 2025 average revenue per paying user (ARPPU) was 11.7 yuan per month, up 9.3% year-over-year and 2.6% quarter-over-quarter [2]. Group 3: Social Entertainment Segment - Q2 2025 social entertainment revenue was 1.59 billion yuan, down 8.5% year-over-year but up 2.3% quarter-over-quarter [2]. - The company expects Q3 2025 social entertainment revenue to decline to 1.51 billion yuan, a year-over-year decrease of 1.9% and a quarter-over-quarter decrease of 5.2% [2]. Group 4: Future Outlook - The company projects net profits for 2025, 2026, and 2027 to be 11.6 billion, 11.1 billion, and 12.8 billion yuan respectively, with upward revisions based on increased music subscription rates [3]. - A target price of 112.8 HKD (102.6 CNY) is set for 2026, based on a P/E ratio of 29 times [3].

Core Viewpoint - The company reported strong Q2 2025 performance, exceeding expectations with significant revenue and profit growth, driven primarily by online music services and a diversified product offering [1][2] Financial Performance - In H1 2025, the company achieved revenue of 15.798 billion, a year-on-year increase of 13.43%, and a net profit of 6.7 billion, up 115.85% [1] - Q2 2025 revenue reached 8.442 billion, reflecting a year-on-year growth of 17.91%, while net profit was 2.409 billion, an increase of 43.22% [1] - Online music service revenue was 6.85 billion, growing 26.4% year-on-year, while social entertainment revenue declined by 8.5% to 1.59 billion [1] Revenue Drivers - The growth in online music services was attributed to a rapid increase in subscription revenue and steady growth in advertising services, artist merchandise, and live performances [1] - Subscription revenue for online music reached 4.38 billion, up 17.1%, driven by an increase in average revenue per paying user, which was 11.7, a 9.3% year-on-year increase [1] Margin Improvement - The gross margin for Q2 2025 was 44.4%, an increase of 2.4 percentage points, primarily due to the rapid growth in subscription and advertising revenue, optimizing the revenue structure [1] Future Outlook - The company plans to enhance its content ecosystem, provide customized support for domestic and international artists, and innovate product offerings to sustain long-term growth [2] - Short-term strategies include promoting internationalization of the Bubble community and enhancing the fan economy ecosystem [2] - Mid-term focus will be on deepening SVIP benefits and increasing investment in AI technology and expanding overseas markets [2] - Long-term goals involve building a comprehensive music entertainment ecosystem encompassing content, platform, social interaction, and performances to increase global market share [2] Investment Recommendation - The company maintains a solid industry position with robust growth, with projected EPS for 2025-2027 at 3.48, 3.29, and 3.72, respectively, and current stock price corresponding to PE ratios of 27X, 28X, and 25X [2]