证券研究报告 | 2025年05月20日 腾讯音乐（TME.N） 优于大市 ARPPU 值提升或将成为订阅业务增长主要驱动 收入同比增长 8.7%，经调整利润率同比+3.5pct。25Q1，公司实现总收入 73.6 亿元，同比+8.7%，环比-1.4%，在线音乐收入占比达 79%。公司毛 利率与经调整利润继续提升，毛利率同比上升 3.1pct，经调整利润率同 比上升 3.5pct。25Q1，公司毛利率 44.1%，同比+3.1pct，环比+0.5pct。 毛利率提升主要系：①版权成本绝对值还是提升的，但是有杠杆作用， 特别是包月会员的 ARPPU 提升带来订阅业务毛利率提升。②自制内容收 入分成比例下降等。我们预计 25 年毛利率继续提升，可达 45%。在成本 端和费用端持续优化下，25Q1公司经调整净利润 22.3亿元，同比+22.8%。 经调整利润率 30.3%，同比+3.5pct，环比-1.9pct。 订阅业务 ARPPU 值提升顺利。25Q1，在线音乐收入 58 亿元，同比+15.9%， 环比-0.5%。1）25Q1，公司订阅业务收入 42.2 亿元，同比+17%，环比 +4.7%。25Q1，公司的在 ...

Investment Rating - The report maintains a "Buy" rating for Tencent Music (TME.N) [5] Core Views - Tencent Music's 1Q25 performance slightly exceeded Bloomberg consensus expectations, achieving revenue of 7.36 billion RMB (up 8.7% YoY) and adjusted net profit of 2.23 billion RMB (up 22.8% YoY) [1][2] - The company is expected to benefit from a solid competitive barrier, with the SVIP program anticipated to boost ARPPU, while non-subscription revenue streams such as advertising and live performances are expected to contribute additional growth [3] Summary by Sections Financial Performance - In 1Q25, Tencent Music's online music revenue reached 5.8 billion RMB (up 15.9% YoY), accounting for 78.9% of total revenue, driven by strong subscription and advertising growth [2] - The adjusted net profit forecast for 2025-2027 has been slightly revised upwards to 9.35 billion, 10.91 billion, and 12.50 billion RMB, reflecting increases of 4.2%, 4.6%, and 6.6% respectively [3][4] Revenue Breakdown - Subscription revenue was 4.22 billion RMB (up 16.6% YoY), with a total of 123 million paying users, an increase of 8.3% YoY [2] - Other music revenue, including advertising, reached 1.58 billion RMB, showing a growth of approximately 14% [2] Cost and Profitability - Operating profit for 1Q25 was 4.84 billion RMB (up 146.9% YoY), primarily due to high growth in other income, including a 2% stake in Universal Music [3] - The company expects an increase in revenue growth rate for the full year 2025 compared to 2024, with a slight rise in sales expenses and potential improvements in profit margins [3]

Investment Rating - The report assigns a "Buy" rating for Tencent Music (TME US) with a target price of $17.00, indicating a potential upside of 15.7% from the current price of $14.69 [1][15]. Core Insights - The report highlights a focus on high-quality membership growth and the release of operational and profit potential, with an adjusted net profit forecast for 2025 increased by 3% to RMB 8.9 billion [1][5]. - The SOTP (Sum of the Parts) target price is derived from music at $14, social at $1, and cash at $2, based on respective price-to-earnings ratios [1][5]. - The report anticipates steady growth in online music, driven by an increase in ARPPU (Average Revenue Per Paying User) that is expected to outpace membership growth [1][5]. Financial Forecasts - Revenue projections for 2025 are set at RMB 31.177 billion, reflecting a 1% increase from previous estimates [2]. - Online music revenue is expected to reach RMB 25.417 billion in 2025, with subscription revenue projected at RMB 17.729 billion, both showing slight increases [2]. - The adjusted net profit for 2025 is forecasted at RMB 8.905 billion, a 3% increase from prior estimates [2]. Quarterly Performance Overview - In Q1 2025, Tencent Music reported revenues of RMB 7.356 billion, with music subscription revenue growing by 16.6% year-over-year [5][8]. - The number of paying music members reached approximately 122.9 million, with a monthly ARPPU of RMB 11.4, reflecting an 8% year-over-year increase [5][8]. - The adjusted net profit for Q1 2025 was RMB 2.226 billion, a 25% increase year-over-year, slightly exceeding market expectations [5][8]. Future Outlook - For Q2 2025, total revenue is projected to be RMB 7.987 billion, with online music revenue expected to grow by 19% year-over-year [10]. - The report anticipates a continued focus on high-quality membership growth, with a forecasted increase in monthly ARPPU to RMB 11.6 [10]. - Non-subscription revenue is expected to grow by 25% year-over-year, driven by advertising and fan economy growth [5][10].

Financial Data and Key Metrics Changes - In Q1 2025, Tencent Music Entertainment Group (TME) reported revenues of RMB 7.4 billion, reflecting a 9% year-over-year growth [22] - Online music revenues increased by 16% year-over-year to RMB 5.8 billion, driven by strong growth in music subscription and advertising revenues [22] - Music subscription revenues reached RMB 4.2 billion, representing a 70% year-over-year increase and a 5% sequential rise [23] - The gross margin improved to 44.1%, up 3.2 percentage points year-over-year, attributed to strong subscription and advertising revenue growth [27] Business Line Data and Key Metrics Changes - The music subscription business remains the cornerstone of TME's revenue, with significant growth in SVIP membership and reduced promotional activity contributing to revenue increases [23][31] - Advertising revenues showed strong year-over-year growth, primarily due to the success of the ad-supported model [24] - Artist-related merchandise sales and offline performances also contributed to revenue growth, with notable sales from physical albums and concerts [25] Market Data and Key Metrics Changes - The company has strengthened partnerships with record labels, enhancing its music library and user engagement through exclusive content and immersive audio experiences [6][7] - There is a growing popularity of diverse music genres, including Korean, English, and Japanese tracks, indicating a shift in user preferences [9] - The company is expanding its presence in the international market, particularly in Southeast Asia, to capture growth opportunities [76] Company Strategy and Development Direction - TME is focused on high-quality growth in its music business, expanding SVIP memberships, and diversifying offerings across the music value chain [31] - The company aims to enhance user engagement through innovative technologies and original content production [31] - TME is committed to building a comprehensive content ecosystem and improving operational efficiency to sustain growth [12][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2025 outlook, expecting year-over-year growth rates to accelerate and margins to expand [36] - The company is optimistic about the long-term potential of the music industry and plans to continue investing in high-quality content and user engagement [31] - Management highlighted the importance of adapting to user preferences and market dynamics to drive future growth [41][53] Other Important Information - TME released its 2024 ESG report, detailing practices in intellectual property protection, user privacy, and fostering diverse music communities [12] - The company declared a cash dividend of US$0.09 per ordinary share for the year ended December 31, 2024, with payments made in April 2025 [31] Q&A Session Summary Question: Outlook for top line profit growth for the next quarter and full year 2025 - Management expressed confidence in achieving strong results in Q1 and expects full-year growth to accelerate, driven by rich service offerings and user engagement [36] Question: Growth opportunity of podcasts in China and long-form audio user metrics - Management noted that while podcast growth in China is limited, long-form audio content is expected to complement existing services and enhance user experience [42] Question: SVIP progress and retention metrics - Management reported strong growth in SVIP membership and ARPPU, with plans to enhance the membership system and improve user satisfaction [48] Question: Contribution of Super VIP to ARPPU growth - Management indicated that the reduction in promotional activities has positively impacted ARPPU, with expectations for continued growth from the SVIP business [52] Question: Monetization strategy for non-paying subscribers - Management emphasized converting non-paying users into subscribers while leveraging advertising and merchandise sales to generate revenue from this segment [58] Question: Future drivers for gross margin improvement - Management highlighted subscriber growth, effective cost management, and strong partnerships with content creators as key drivers for future gross margin expansion [70] Question: International opportunities, especially in Southeast Asia - Management confirmed that international markets are a key part of their strategy, with ongoing investments in content and platform development in Southeast Asia [76] Question: Outlook for advertising and offline events business - Management remains optimistic about advertising revenue growth and plans to enhance the quality of offline performances to provide comprehensive musical experiences [82]

Revenue Growth - Total revenues for Q1 2025 were RMB7.36 billion (US$1.01 billion), an 8.7% year-over-year increase, driven by growth in online music services[3] - Revenues from music subscriptions reached RMB4.22 billion (US$581 million), representing a 16.6% year-over-year growth, with paying users increasing by 8.3% to 122.9 million[3] - Revenues from online music services increased by 15.9% year-over-year to RMB5.80 billion (US$800 million), driven by subscription and advertising revenue growth[15] - Total revenues for the three months ended March 31, 2025, increased to RMB 7,356 million, up 8.7% from RMB 6,768 million in the same period of 2024[31] - Online music services revenue rose to RMB 5,804 million, representing a 15.9% increase compared to RMB 5,007 million in the prior year[31] Profitability - Net profit attributable to equity holders was RMB4.29 billion (US$591 million), a 201.8% year-over-year increase, while non-IFRS net profit was RMB2.12 billion (US$293 million), up 24.6% year-over-year[3] - Gross margin improved to 44.1% from 40.9% in the same period of 2024, primarily due to strong growth in music subscription revenues[13] - Gross profit for the period was RMB 3,242 million, reflecting a gross margin of 44.1%, compared to RMB 2,771 million and a margin of 41.0% in the previous year[31] - Operating profit surged to RMB 4,836 million, a significant increase of 146.5% from RMB 1,959 million in the same quarter of 2024[31] - Non-IFRS net profit for the period was RMB 2,226 million, up 22.9% from RMB 1,812 million year-over-year[32] - Basic earnings per share increased to RMB 1.40, compared to RMB 0.46 in the same period last year, marking a growth of 204.3%[31] Cash and Investments - Total cash and short-term investments as of March 31, 2025, amounted to RMB37.67 billion (US$5.19 billion), slightly up from RMB37.58 billion at the end of 2024[20] - Cash and cash equivalents at the end of the period were RMB 12,022 million, an increase from RMB 10,218 million at the end of the previous quarter[38] - The company reported a net cash used in investing activities of RMB 3,221 million for the quarter, down from RMB 5,498 million in the same period last year[38] Shareholder Returns - The company declared a cash dividend of US$0.09 per ordinary share, totaling US$275 million, paid in April 2025[22] - The company repurchased 5.9 million ADSs for approximately US$64.5 million at an average price of US$10.8 per ADS during Q1 2025[21] Assets and Equity - Total assets as of March 31, 2025, reached RMB 98,084 million, up from RMB 90,444 million at the end of December 2024[36] - The company’s equity attributable to equity holders increased to RMB 73,237 million, compared to RMB 67,863 million at the end of the previous year[36] Social Entertainment Services - Revenues from social entertainment services decreased by 11.9% to RMB1.55 billion (US$214 million), attributed to adjustments in live-streaming functions[15] User Engagement - Monthly ARPPU for online music grew to RMB11.4 from RMB10.6 in Q1 2024, reflecting a 7.5% increase[5]

Financial Data and Key Metrics Changes - In Q1 2025, total revenues reached RMB 7.4 billion, representing a 9% year-over-year growth [19] - Online music revenues increased by 16% year-over-year to RMB 5.8 billion, driven by strong growth in music subscription and advertising revenues [20] - Music subscription revenues reached RMB 4.2 billion, a 70% increase year-over-year [20] - Gross margin improved to 44.1%, up 3.2 percentage points year-over-year [23] - Net profit was RMB 4.4 billion, with a net profit attributable to equity holders of RMB 4.3 billion [25] Business Line Data and Key Metrics Changes - The music subscription business remains the cornerstone, with significant growth in SVIP membership and reduced promotional activity contributing to revenue increases [20][27] - Advertising revenues showed strong year-over-year growth, supported by the ad-supported model and increased engagement [20][21] - Artist-related merchandise sales and offline performances also contributed to revenue growth, with successful concert hosting leading to increased revenues [21][22] Market Data and Key Metrics Changes - The company has strengthened partnerships with record labels, enhancing its music library and user engagement [5][6] - There is a growing popularity of Korean, English, and Japanese tracks among users, indicating a diversification in music consumption preferences [7] - The company has expanded its merchandise collaborations, which have shown strong sales performance [8][9] Company Strategy and Development Direction - The company aims to enhance user engagement through a diverse range of music services and content offerings, focusing on high-quality growth [4][12] - Continued investment in original content production and innovative technologies is planned to improve user experience and strengthen the ecosystem [27] - The company is committed to expanding its SVIP membership and advertising business while diversifying offerings across the music value chain [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2025 outlook, expecting year-over-year growth rates to accelerate and margins to expand [31] - The company is focused on encouraging more music consumption and enhancing user engagement through unique offerings [31][32] - Management highlighted the importance of long-form audio content and its complementary role in driving user engagement and subscription growth [38] Other Important Information - The company released its 2024 ESG report, detailing practices in intellectual property protection, user privacy, and fostering diverse music communities [11] - The effective tax rate for Q1 2025 was 9.2%, a decrease from 19.9% in the same period of 2024 [25] Q&A Session Summary Question: Outlook for top line profit growth for the next quarter and full year 2025 - Management expressed confidence in achieving strong results in Q1 and expects growth rates to accelerate in 2025, driven by rich service offerings and user engagement [31] Question: Growth opportunity of podcasts in China and long-form audio user metrics - Management noted that while podcast growth in China is limited, long-form audio content is expected to grow and complement the existing subscriber base [36][38] Question: SVIP progress and key KPIs - Management reported strong growth in SVIP membership and ARPPU, with plans to enhance the membership system and improve user satisfaction [40][43] Question: Contribution of Super VIP to ARPPU growth - Management indicated that the reduction in promotional activities has positively impacted ARPPU growth, with expectations for continued growth from the SVIP business [46][48] Question: Monetization strategy for nonpaying subscribers - Management emphasized converting nonpaying users into subscribers and leveraging advertising and merchandise sales to generate revenue from this segment [51][55] Question: Future drivers for gross margin improvement - Management highlighted subscriber growth and cost management as key drivers for future gross margin improvement, with expectations for continued growth [60][62] Question: International opportunities, especially in Southeast Asia - Management acknowledged the importance of international markets and plans to invest in content creation and platform development in Southeast Asia [68][71] Question: Outlook for advertising and offline events business - Management expressed a positive outlook for advertising revenue growth and plans to enhance the quality of offline performances [79][80]

Investment Rating - The report maintains a "Buy" rating for Tencent Music (TME.US) with a target price of $15.80, indicating a potential upside of 20.2% from the current price of $13.14 [1][6][11]. Core Insights - The company achieved robust performance in 2024, with total revenue of 28.4 billion RMB, a year-on-year increase of 2.3%. Net profit reached 7.11 billion RMB, up 36.2%, while adjusted net profit was 8.14 billion RMB, reflecting a growth of 30.7% [4][8]. - The integration of AI technology into the music experience is expected to drive a second growth curve for the business, enhancing user engagement and creating new commercial opportunities [5][9][10]. - The report highlights the company's strategic focus on AI technology as a key driver for enhancing its competitive edge in the digital music sector, leading to improved user experience and content ecosystem [6][11]. Financial Performance - In 2024, the online music service revenue was 20.23 billion RMB, growing by 16.1%, with subscription revenue reaching 15.23 billion RMB, a 25.9% increase. The number of paid users grew to 121 million, a 13.4% increase [8]. - The sales gross margin improved from 35.3% in 2023 to 42.3% in 2024, driven by strong growth in subscription and advertising revenues [4][8]. - The report projects continued revenue growth, with expected revenues of 31.08 billion RMB in 2025, reflecting a year-on-year growth of 9.43% [7]. Shareholder Structure - Major shareholders include Tencent with a 47.80% stake and Spotify with 4.12% [3]. Valuation Metrics - The report values the online music business at 7 times price-to-sales (PS) and the social entertainment business at 6 times price-to-earnings (PE), supporting the target price of $15.80 [6][11].

Financial Performance - Total revenues for Q4 2024 were RMB7.46 billion (US$1.02 billion), an 8.2% year-over-year increase, driven by growth in online music services[4] - Revenues from music subscriptions reached RMB4.03 billion (US$552 million), representing an 18.0% year-over-year growth, with paying users increasing by 13.4% to 121.0 million[4] - Net profit for Q4 2024 was RMB2.08 billion (US$284 million), a 47.3% year-over-year growth, while non-IFRS net profit was RMB2.40 billion (US$329 million), up 43.0%[4] - Full year 2024 total revenues increased to RMB28.40 billion (US$3.89 billion), a 2.3% year-over-year growth, with music subscription revenues growing by 25.9% to RMB15.23 billion (US$2.09 billion)[24][28] - Total operating profit for Q4 2024 was RMB2.41 billion (US$330 million), representing a 40.5% year-over-year increase[18] - For the full year of 2024, net profit was RMB7.11 billion (US$974 million), with net profit attributable to equity holders of the Company at RMB6.64 billion (US$910 million) [30] - Non-IFRS net profit for the full year of 2024 was RMB8.14 billion (US$1.12 billion), and non-IFRS net profit attributable to equity holders was RMB7.67 billion (US$1.05 billion) [30] - Basic and diluted earnings per ADS for the full year of 2024 were RMB4.31 (US$0.59) and RMB4.24 (US$0.58), respectively [31] - The profit for the three months ended December 31, 2024, increased to RMB 2,076 million, representing a 47% growth compared to RMB 1,409 million in the same period of 2023[47] - Non-IFRS net profit for the year ended December 31, 2024, reached RMB 8,136 million, up 30.5% from RMB 6,223 million in 2023[47] - Basic earnings per share for Class A and Class B ordinary shares increased to RMB 0.74 for the three months ended December 31, 2024, compared to RMB 0.51 in the same period of 2023, reflecting a 45% increase[47] Revenue Breakdown - Revenues from online music services grew by 16.1% year-over-year to RMB5.83 billion (US$799 million) in Q4 2024, driven by subscription and advertising revenue growth[16] - Revenues from social entertainment services decreased by 13.0% to RMB1.63 billion (US$223 million) in Q4 2024, primarily due to adjustments in live-streaming functions[14][28] - Online music services revenue for the year ended December 31, 2024, was RMB21.74 billion (US$2.98 billion), an increase from RMB17.33 billion in 2023 [44] Profitability and Margins - Gross margin for Q4 2024 improved to 43.6% from 38.3% in Q4 2023, attributed to strong growth in music subscription revenues and advertising services[17] - Gross profit for the year ended December 31, 2024, was RMB12.03 billion (US$1.65 billion), compared to RMB9.80 billion in 2023 [44] - Operating profit for the year ended December 31, 2024, was RMB8.71 billion (US$1.19 billion), up from RMB6.06 billion in 2023 [44] Cash and Investments - Cash and cash equivalents at the end of the year decreased slightly to RMB 13,164 million from RMB 13,567 million at the beginning of the year[54] - The company reported net cash provided by operating activities of RMB 10,275 million for the year ended December 31, 2024, a significant increase from RMB 7,337 million in 2023[54] - The company experienced a net cash used in investing activities of RMB 6,818 million for the year ended December 31, 2024, compared to RMB 1,863 million in 2023, indicating increased investment activity[54] - The company’s financial assets at fair value through other comprehensive income increased significantly to RMB 14,498 million as of December 31, 2024, from RMB 6,540 million in 2023, reflecting a 121% increase[50] Shareholder Returns - The company announced an annual cash dividend of approximately US$273 million and a new share repurchase program of up to US$1 billion[5][8] - The Company declared a cash dividend of US$0.09 per ordinary share, totaling approximately US$273 million for the fiscal year of 2024 [33] - The board of directors authorized a new Share Repurchase Program to repurchase up to US$1 billion of Class A ordinary shares over a 24-month period starting March 2025 [32] Assets and Equity - Total assets as of December 31, 2024, are RMB 90,444 million, an increase of 19.7% from RMB 75,536 million as of December 31, 2023[50] - The total equity attributable to equity holders of the company increased to RMB 67,863 million as of December 31, 2024, compared to RMB 55,907 million as of December 31, 2023, marking a 21.4% growth[51] - Investments accounted for using the equity method rose to RMB 4,669 million as of December 31, 2024, up from RMB 4,274 million in 2023[50] ESG Initiatives - The Company supported 192,000 female artists as part of its ESG initiatives, promoting diversity and inclusion in the music community [34]

Core Points - Tencent Music Entertainment Group (TME) has filed its annual report on Form 20-F with the SEC, including audited financial statements for the fiscal year ended December 31, 2024 [1] - The annual report is accessible on TME's investor relations website and the SEC's website, with hard copies available to shareholders upon request [2] - TME is recognized as the leading online music and audio entertainment platform in China, operating popular music apps such as QQ Music, Kugou Music, Kuwo Music, and WeSing [3]

Financial Performance - Total revenues for the year ended December 31, 2023, were RMB 27,752 million, a slight increase from RMB 26,770 million in 2022, representing a growth of approximately 3.6%[57] - Gross profit for 2023 was RMB 9,795 million, compared to RMB 3,747 million in 2022, indicating a significant increase of 161.5%[57] - Operating profit for 2023 reached RMB 6,059 million, a substantial rise from an operating loss of RMB 131 million in 2022[57] - Profit for the year 2023 was RMB 5,220 million, compared to a loss of RMB 302 million in 2022, marking a turnaround in profitability[57] - The company reported a profit for the year 2024 of RMB 7,109 million, up from RMB 5,220 million in 2023, representing a growth of approximately 36.3%[59] Assets and Liabilities - Total assets as of December 31, 2023, amounted to RMB 75,536 million, an increase from RMB 62,859 million in 2022, reflecting a growth of approximately 20.2%[60] - Total liabilities as of December 31, 2023, were RMB 18,334 million, compared to RMB 6,952 million in 2022, indicating a significant increase of 163.5%[60] - Investments in subsidiaries increased to RMB 51,534 million as of December 31, 2024, compared to RMB 38,375 million in 2023, reflecting a growth of 34.3%[61] Cash Flow - For the year ended December 31, 2023, the consolidated net cash inflow from operating activities was RMB 7,337 million, a slight decrease from RMB 7,481 million in 2022[63] - The net cash inflow from investing activities for 2023 was RMB 307 million, compared to a net outflow of RMB 1,446 million in 2022[63] - The net cash outflow from financing activities in 2023 was RMB 1,538 million, an improvement from RMB 3,419 million in 2022[63] - For the year ended December 31, 2024, the consolidated net cash inflow from operating activities is projected to be RMB 10,275 million, up from RMB 7,337 million in 2023[64] Regulatory Environment - The Group faces significant legal and operational risks due to regulatory authority in China, which could impact business operations and financial performance[48] - The VIE structure is essential for foreign investment exposure in China-based companies, as direct foreign investment is restricted[40] - Recent regulatory developments in China have strengthened oversight on cybersecurity and data privacy, which may affect operational compliance and data management strategies[69] - The China Securities Regulatory Commission (CSRC) implemented new filing requirements for PRC domestic companies seeking to list overseas, effective March 31, 2023[75] Legal Risks - The company faces significant competition from other online music services and emerging content forms like live streaming and user-generated videos[169] - As of December 31, 2024, there are 315 pending lawsuits related to copyright infringement against the company, with total damages sought amounting to approximately RMB198.7 million (US$27.2 million)[201] - The company may face litigation based on allegations of copyright infringement, which could require significant time and financial resources to defend against[135] Operational Challenges - The company faces risks related to user preferences and content licensing, which could adversely affect user retention and financial performance[90] - The company must navigate complex license agreements and potential copyright infringement claims, which may limit operational flexibility and financial outcomes[94] - Compliance with evolving cybersecurity and data protection laws may incur significant costs and necessitate adverse changes to business operations[99] Strategic Initiatives - The company is investing heavily in content creation and partnerships within the Tencent ecosystem to enhance user experience and meet evolving demands[207] - The company has devoted substantial efforts to monetize its content and user base, generating revenue from online music services and social entertainment, but faces challenges in increasing paying users[151] - The company is incorporating AI technology across its product offerings to enhance music content distribution and production, requiring it to stay current with industry trends[157] Economic Factors - Economic challenges in China or globally could materially impact the company's financial condition[100] - The global macro-economic environment presents challenges, including geopolitical tensions and economic sanctions that could impact the company's financial condition[237]