Investment Rating - The report maintains a "Buy" rating for NetEase Cloud Music (09899) [1] Core Insights - The first quarter gross margin optimization exceeded expectations, leading to a 6% and 9% upward adjustment in the adjusted net profit for the current and next year, reaching RMB 1.93 billion and RMB 2.2 billion respectively [1] - Based on SOTP valuation, the target price has been raised by 30%, from HKD 184 to HKD 240 [1] Revenue Projections - For 2025, the report anticipates continued robust momentum in online music membership subscriptions, projecting a 15% year-on-year increase in online music revenue and a 16% increase in membership subscription revenue [1] - Non-member business revenue is expected to grow by 11% year-on-year this year [1] - Social revenue is projected to remain stable in terms of profit [1]

Group 1 - The core viewpoint is that the company has raised its adjusted net profit forecasts for 2025 and 2026 by 6% and 9% to 1.93 billion and 2.20 billion RMB respectively, based on better-than-expected cost optimization [1] - The target price for the next 12 months has been increased to 240 HKD from 184 HKD, with the core business contributing 223 HKD based on an average P/E ratio of 20 times for quality content and copyright companies [1] - The cash contribution to the target price is 17 HKD, reflecting a 30% discount [1] Group 2 - In Q1 2025, the company reported revenue of 1.86 billion RMB, a year-on-year decline of 8%, which is a larger drop compared to a 2% decline in the second half of 2024, primarily due to a decrease in social entertainment revenue [1] - The gross margin improved to 36.7%, up 3.7 percentage points year-on-year, benefiting from growth in subscription revenue and optimization in live streaming revenue sharing [1] - For 2025, online music revenue is expected to grow by 15% year-on-year, with subscription revenue projected to increase by 16%, driven by membership expansion [2] - Non-member business revenue is anticipated to rise by 11%, although advertising revenue growth may slow due to a high base effect [2] - Social revenue expectations have been lowered by 7% to 1.8 billion RMB, corresponding to a year-on-year decline of 31%, but profit is expected to remain stable due to optimized revenue sharing costs [2]

Core Viewpoint - The report from CMB International raises the target price for NetEase Cloud Music (09899.HK) to HKD 240, maintaining a "Buy" rating due to faster-than-expected cost optimization and growth potential in long-term membership revenue [1] Financial Performance - Adjusted net profit forecasts for 2025 and 2026 have been increased by 6% and 9% respectively [1] - The gross profit margin for the first quarter of this year increased by 3.7 percentage points year-on-year to 36.7%, surpassing both the bank's and market expectations [1] Revenue Drivers - The growth in membership subscription revenue, increased income from various professional services, and optimization of live streaming revenue sharing are key contributors to the improved financial performance [1] Market Outlook - There is significant operational space for the paid wall and ARPPU (Average Revenue Per Paying User), indicating a positive long-term outlook for membership income growth [1]

Investment Rating - The report assigns a "Buy" rating to the company, indicating an expectation of total returns exceeding the relevant industry over the next 12 months [3][12]. Core Insights - The report highlights an optimistic outlook for the company's profitability, with an upward revision of the target price to HKD 240, reflecting a potential upside of 15.5% from the current price of HKD 207.80 [2][12]. - The adjusted net profit forecasts for 2025 and 2026 have been increased by 6% and 9% respectively, reaching RMB 19.3 billion and RMB 22.0 billion [2][8]. - The report emphasizes the strong growth potential in membership revenue, driven by the company's paid subscription model and ARPPU (Average Revenue Per Paying User) [2][7]. Financial Performance Summary - The company reported a revenue of RMB 18.6 billion for Q1 2025, a year-on-year decline of 8%, primarily due to a decrease in social entertainment revenue [7]. - Gross margin improved to 36.7%, up 3.7 percentage points year-on-year, benefiting from increased subscription revenue and optimized revenue sharing from live streaming [7]. - For 2025, the company expects online music revenue to grow by 15%, with subscription revenue projected to increase by 16% [7]. - The financial forecasts for 2025 include total revenue of RMB 7,970 million, with a gross profit of RMB 2,967 million and a gross margin of 37.2% [8][13]. - The adjusted operating profit is forecasted to be RMB 1,607 million for 2025, reflecting a 9% increase from previous estimates [6][13]. Valuation Metrics - The report utilizes a Sum-of-the-Parts (SOTP) valuation method, attributing HKD 223 to core business contributions based on a 20x average P/E ratio and HKD 17 to cash contributions at a 30% discount [2][12]. - The company's market capitalization is reported at approximately HKD 43.67 billion, with a 52-week high of HKD 217.60 and a low of HKD 89.75 [5][12].

Core Viewpoint - NetEase Cloud Music has filed a lawsuit against Tencent Music Entertainment and its subsidiaries for abusing market dominance, with the case set to be heard on June 5 in the Zhejiang Provincial High Court [1] Company Summary - The lawsuit involves multiple parties, including Hangzhou NetEase Cloud Music Technology Co., Ltd. and Hangzhou LeDu Technology Co., Ltd. as plaintiffs, and Dongyang Huanyu Film and Television Culture Co., Ltd., Tencent Music Entertainment (Shenzhen) Co., Ltd., and Tencent Music Entertainment Technology (Shenzhen) Co., Ltd. as defendants [1] - Dongyang Huanyu Film and Television Culture Co., Ltd. was established in August 2012, with a registered capital of 30 million RMB, and is co-owned by Yu Zheng, Yang Yin Feng, and a limited partnership [1]

Industry Overview - The global recorded music market is projected to reach $29.6 billion in 2024, reflecting a 5% year-on-year growth [1] - Music streaming channels are the primary growth driver, accounting for 68% of the market, with revenues expected to reach $20.4 billion in 2024, marking a 7% increase [1] - The U.S. holds the largest market share at 38%, followed by Japan at 8%, the UK, Germany, and China, which ranks fifth with a market size of $1.6 billion, representing a 9.6% growth and 5% of the global share [1] Online Music Industry Dynamics - The online music industry is entering a phase of healthy growth due to improved competitive dynamics, increased user willingness to pay, and a restructured value chain [1] - The domestic music industry in China shows stable demand, with leading companies achieving differentiation through community building and support for independent music content, indicating long-term growth potential [2] - The online music platforms benefit from higher migration costs, longer content lifecycles, and stronger payment stickiness compared to long video platforms [2] Company Performance - Tencent Music reported a 8.7% year-on-year revenue growth to 7.36 billion yuan in Q1, with adjusted net profit increasing by 22.8% to 2.23 billion yuan [3] - Tencent's online music service revenue grew by 15.9% to 5.8 billion yuan, with subscription revenue rising by 16.6% to 4.22 billion yuan, and paid user count reaching 122.9 million [3] - NetEase Cloud Music achieved a net revenue of 1.858 billion yuan in Q1, with operating costs decreasing by 6.6% year-on-year, leading to a gross profit of 683 million yuan, reflecting a 13.7% quarter-on-quarter growth [3]

Investment Rating - The report provides a positive investment rating for the online music industry, highlighting its long-term growth potential due to stable demand and competitive dynamics [3][5]. Core Insights - The domestic music industry is experiencing stable demand, with leading companies differentiating themselves through community building and support for independent music content, indicating long-term growth potential [3]. - Compared to long video platforms, the online music sector benefits from higher switching costs, longer content lifecycles, and stronger payment stickiness, creating a favorable growth environment [4]. - The end of exclusive copyright agreements has reduced cost pressures, while regulatory guidance fosters healthy competition, enhancing growth potential [5]. - The overseas market, particularly Spotify, shows high growth potential through expansion in non-European and American countries, exploring higher-tier membership systems, and enhancing advertising capabilities [5]. Summary by Sections Industry Overview - The report indicates that the online music platforms are experiencing a 1% slight growth in overall MAU by December 2024, while video platforms show stagnation or decline in some cases [4][7]. - The community atmosphere and user relationships on music platforms create higher switching costs compared to video platforms, which rely heavily on top-tier content [4][14]. Competitive Landscape - The competitive landscape is characterized by two leading music platforms against four major video platforms, with music platforms benefiting from reduced copyright costs and a more fragmented content supply [31][39]. - The report notes that the domestic music market has entered a stable growth phase post-2020 regulatory normalization, with leading companies focusing on their core online music business [5][31]. Company Performance - Tencent Music and NetEase Cloud Music are positioned for steady growth, with Tencent Music reporting a MAU of 555 million and a 8.3% year-on-year increase in paid users as of Q1 2025 [5][13]. - NetEase Cloud Music's growth is attributed to its UGC community and support for independent musicians, with a current ARPPU of 6.9 yuan, indicating room for improvement compared to Tencent Music's 10.8 yuan [5][13]. International Market Insights - Spotify, as the largest global online music platform, has over 675 million users, with 263 million being paid subscribers, showcasing its significant market presence [47][87]. - The report highlights Spotify's strategy of expanding into non-European and American markets, which has been a key driver for its MAU growth [87][97]. Future Outlook - The report suggests that the online music industry is well-positioned for sustainable growth, driven by favorable competitive dynamics, regulatory support, and innovative strategies from leading companies [3][5].

Investment Rating - The report maintains a "Buy" rating for NetEase Cloud Music (9899.HK) [4] Core Insights - The company's revenue for Q1 2025 was 1.86 billion RMB, a year-on-year decrease of 8.4%, primarily due to a decline in social entertainment business revenue, while online music revenue showed resilience [1] - The gross profit for Q1 2025 was 680 million RMB, with a gross margin of 36.7%, reflecting a year-on-year decline of 1.3 percentage points but a quarter-on-quarter increase of 4.8 percentage points [1] - The company emphasizes the importance of ROI in content procurement and has seen a continuous improvement in gross margin due to operational leverage [1] Summary by Sections Financial Performance - For Q1 2025, NetEase Cloud Music achieved a gross profit of 680 million RMB, with a gross margin of 36.7%, down 1.3 percentage points year-on-year but up 4.8 percentage points quarter-on-quarter [1] - The actual gross profit for Q1 2024 was approximately 670 million RMB, leading to a year-on-year growth of about 2.0% in actual gross profit for Q1 2025 [1] Business Strategy - The company focuses on independent musicians, being the largest online incubator for independent musicians in China, with over 773,500 registered independent musicians and approximately 4.4 million music tracks uploaded by the end of 2024 [2] - NetEase Cloud Music has strengthened its copyright content by enhancing cooperation with copyright holders, including a preliminary consensus with South Korea's SM Entertainment for copyright renewal [2] Product Development - The company has made adjustments to its platform based on user feedback, enhancing user experience through various product optimizations and introducing new features like "Listen Together with Strangers" to strengthen social attributes [3] - In March 2025, the company launched the DeepSeek feature, marking a significant step in AI integration within the music industry [3] Profitability Forecast - The report predicts adjusted net profit for 2025 to be 1.901 billion RMB, with a growth rate of 11.8% [5] - The adjusted EPS for 2025 is projected to be 8.75 RMB, with a P/E ratio of 20 [5]

Core Insights - Net revenue from gaming and related value-added services for NetEase reached RMB 24 billion (USD 3.3 billion), representing a year-on-year growth of 12.1% compared to the same period in 2024 [1] Group 1: Financial Performance - Youdao's net revenue was RMB 1.3 billion (USD 178.9 million), showing a decline of 6.7% year-on-year compared to 2024 [1] - NetEase Cloud Music reported net revenue of RMB 1.9 billion (USD 256.1 million), which is a decrease of 8.4% year-on-year compared to 2024 [1] - Revenue from innovative businesses and others amounted to RMB 1.6 billion (USD 223.8 million), reflecting a decline of 17.6% year-on-year compared to 2024 [1]

金十数据5月15日讯，港股早盘震荡反覆，午后持续走低，恒指收跌0.79%，报23453.16点。恒生科技指 数收跌1.56%，报5297.84点。截至今日收盘，恒指大市成交额2002.09亿港元。盘面上，科网股分化， 芯片股走低，黄金股下跌，影视娱乐股逆市走高，个股方面，乐华娱乐(02306.HK)涨超32%，微盟集团 (02013.HK)涨19.3%，腾讯音乐(01698.HK)涨6.8%；京东(09618.HK)、网易云音乐(09899.HK)跌超4%， 中芯国际(00981.HK)、舜宇光学科技(02382.HK)、华润置地(01109.HK)跌超3%。 港股收评：科指收跌1.56% 乐华娱乐逆市大涨32% ...