Investment Rating - The investment rating for the company is "Outperform the Market" [4][48]. Core Insights - The company is a leading online music streaming platform in China, focusing on a young audience and enhancing its subscription business through an increase in paid user numbers [1][10]. - The competitive landscape is characterized by a duopoly between the company and Tencent Music, with the company holding approximately 27% market share [2][13]. - The company's revenue for 2024 is projected to be 79.5 billion CNY, with a year-on-year growth of 1%, primarily due to a decline in social entertainment services [3][18]. Financial Analysis - The company's core business segments are online music services and social entertainment services, with online music services accounting for 67% of total revenue in 2024 [3][18]. - Online music revenue is expected to reach 53.5 billion CNY in 2024, reflecting a year-on-year increase of 23% [3][18]. - The subscription revenue for 2024 is projected to be 44.6 billion CNY, up 22% year-on-year, driven by an increase in paid user numbers [3][19]. - The company’s gross margin for 2024 is estimated at 34%, an increase of 7 percentage points year-on-year, indicating improved cost management [4][34]. - Adjusted profit for 2024 is expected to be 1.7 billion CNY, representing a significant year-on-year increase of 108% [4][28]. Market Positioning - The company has a strong focus on community engagement and emotional connection with users, leveraging user-generated content and a unique review culture to enhance user retention [2][10]. - The company has been gradually regaining music copyrights since the cancellation of exclusive rights in 2021, which is expected to improve its content offerings [2][14]. Profitability Forecast - Revenue projections for 2025 to 2027 are 86.68 billion CNY, 96.76 billion CNY, and 108.10 billion CNY, respectively, with compound annual growth rates (CAGR) of 9%, 12%, and 12% [9][40]. - Adjusted profits for the same period are forecasted to be 2.1 billion CNY, 2.5 billion CNY, and 3.0 billion CNY, with a CAGR of 21% [9][41]. Valuation - The target price for the company is set between 311 and 354 HKD, reflecting a potential upside of 30% to 48% from the current price [4][42]. - The company is compared favorably against international peers like Spotify and domestic competitor Tencent Music, with a projected PE ratio for 2025 of 29-33x [4][42].

Investment Rating - The report maintains an "Outperform" rating for the online music industry [1] Core Insights - The online music industry exhibits strong bilateral effects and is less correlated with the economy, with "one super and one strong" company identified as high-quality long-term cash flow assets [2] - The industry is characterized by high concentration due to significant copyright fees, making it difficult for new entrants [2] - The growth of music subscriptions is driven by supply-side factors, with low churn rates observed in subscription services [2][32] - The Chinese digital music market is expected to grow by 15% year-on-year in 2024, outpacing global growth [7][12] Summary by Sections 01 Overview of Domestic and International Online Music Industry - The online music industry has a high concentration, with Tencent Music holding approximately 66% market share and NetEase Cloud Music around 27% [25] - The industry is experiencing a shift towards subscription models, with significant growth in paid users [32] 02 Tencent Music and Spotify Stock Review - Tencent Music's subscription business is a key growth driver, with a projected CAGR of 19% for subscription revenue from 2024 to 2027 [5] - Spotify is expected to achieve profitability in 2024, with a focus on cost reduction and efficiency improvements [4] 03 Financial Analysis - The subscription penetration rates for Tencent Music and NetEase Cloud Music are projected to reach 25% and 20.6% respectively by 2024 [5] - The average revenue per paying user (ARPPU) for Tencent Music is expected to increase, driven by the development of premium services [5] 04 Valuation Analysis and Investment Recommendations - The online music industry is projected to maintain a CAGR of 15% over the next three years, indicating growth potential [5] - Current price-to-earnings (PE) ratios for Tencent Music, NetEase Cloud Music, and Spotify are 23x, 27x, and 38x respectively for 2025 [5]

Investment Rating - The report maintains a positive outlook on the Hong Kong stock market, particularly in sectors such as AI, new consumption, and innovative pharmaceuticals, indicating a rising risk appetite among investors [2][9]. Core Insights - The Hong Kong stock market has shown significant improvement in risk appetite, with notable performance in sectors like AI, new consumption, and innovative pharmaceuticals, leading to increased investor interest, especially in small and mid-cap stocks [2][9]. - The report suggests active participation in A+H shares due to observed discount phenomena in IPOs, with a focus on new consumption and manufacturing sectors [2][9]. - There is a sustained bullish outlook on virtual assets and the Web 3.0 market, driven by stablecoin policies and IPOs, with expectations for more regulatory developments in the future [2][9]. - The valuation of overseas Chinese assets remains influenced by US-China trade relations and the broader economic environment, highlighting the need to monitor changes in US tariff policies and domestic economic strategies [2][9]. Industry Tracking Summary 1. Education - The education index decreased by 0.98% from June 9 to June 13, underperforming compared to major indices, with 51talk rising by 12.09% and Thinking Education falling by 11.55% [10][14]. 2. Luxury Goods - The luxury goods sector faced slight pressure, with key stocks like Prada declining by 6.01% while new brands like Shiseido rose by 2.02% during the same period [18][21]. 3. Coffee and Tea - The sector showed stable growth, with individual stocks like Luckin Coffee increasing by 1.87%, while others like Bawang Tea experienced declines [23][27]. 4. E-commerce - The e-commerce sector saw a slight decline, with major players like Alibaba and JD.com facing competitive pressures, while the Hang Seng Internet Technology Index rose by 3.46% [29][34]. 5. Streaming Platforms - The streaming sector outperformed, with Tencent Music and NetEase Cloud Music showing significant gains, while Netflix experienced a decline [35][38]. 6. Virtual Assets & Internet Brokers - The global cryptocurrency market capitalization increased by 5.9%, with Bitcoin and Ethereum prices showing slight fluctuations, indicating ongoing interest in virtual assets [42][43].

Group 1 - The Hong Kong stock market for the film and entertainment sector is experiencing a volatile upward trend [1] - NetEase Cloud Music (09899.HK) has seen an increase of over 6.5% [1] - Tencent Music (01698.HK) has risen by more than 2.5% [1] - Alibaba Pictures (01060.HK) has gained over 1% [1]

Investment Rating - The report maintains a positive outlook on the Hong Kong stock market, indicating a strong risk appetite and suggesting investment opportunities in various sectors, particularly in virtual assets and Web 3.0 [3][10]. Core Insights - The Hong Kong stock market is experiencing a significant increase in risk appetite, with improved asset quality and trading volume, highlighting the value of asset trading platforms [3][10]. - There is a notable uptrend in multiple sectors such as AI, new consumption, and innovative pharmaceuticals, with a particular focus on small and mid-cap stocks in media and consumer sectors [3][10]. - The report emphasizes the ongoing development of virtual assets and the Web 3.0 market, driven by stablecoin policies and recent IPOs, suggesting that more regulatory frameworks will emerge [3][10]. - The trend of Chinese companies returning to Hong Kong for IPOs is gaining momentum, with increased trading of companies like NetEase and Ctrip in the Hong Kong market [3][10]. - The valuation of overseas Chinese assets remains influenced by US-China trade relations and the broader economic environment, necessitating close monitoring of trade policies and domestic economic changes [3][10]. Summary by Sections Education - The K12 education sector maintains high growth, with leading institutions reporting over 20% revenue growth during the winter training period, and an increase in non-academic course retention rates [5][11]. Luxury Goods - The luxury goods market shows slight pressure due to macroeconomic factors, but brands that align with demand trends are performing well, with cautious price increases observed [5][20]. Coffee and Tea Drinks & OTA - Coffee and tea remain key categories for delivery platforms, with strong performance from major brands like Luckin Coffee, which continues to expand its store presence [5][25]. E-commerce - The e-commerce sector faces slight pressure, but major platforms like Alibaba and JD.com are expected to benefit from ongoing promotional activities [5][26]. Streaming Platforms - Music streaming platforms are viewed as high-quality internet assets, with sustained profitability driven by scale effects [5][34]. Virtual Assets & Internet Brokers - The stablecoin leader Circle's IPO saw a 168% increase on its first day, marking a significant event in the virtual asset space [5][38]. Real Estate Transactions - Recent data shows a slight decline in second-hand housing transactions in major cities, suggesting a need for caution in the real estate market [5][50]. Automotive Services - The automotive aftermarket is under pressure, with traditional fuel vehicle service visits declining, while new energy vehicle service visits are increasing [5][45].

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]