Core Insights - Tencent Music's Q3 revenue reached 8.463 billion yuan, a year-on-year increase of 21%, exceeding Bloomberg's expectations by 2.8%, driven by growth in fan economy-related income [1] - The adjusted net profit attributable to shareholders (Non-IFRS) for Q3 was 2.41 billion yuan, a year-on-year increase of 33%, also surpassing Bloomberg's expectations by 3.7%, primarily due to high growth in online music [1] Revenue Breakdown - Online music revenue for Q3 was 6.97 billion yuan, up 27% year-on-year, with membership revenue contributing 4.49 billion yuan, an 18% increase year-on-year, driven by SVIP package offerings [2] - The average revenue per paying user (ARPPU) for Q3 was 11.9 yuan/month, a 12% year-on-year increase, with expectations for Q4 ARPPU to reach 12.2 yuan/month, a 14% increase year-on-year [2] - Non-subscription revenue for Q3 was 2.48 billion yuan, a significant 48% year-on-year increase, attributed to strong performance in concerts and innovative advertising formats [2] Social Entertainment Performance - Social entertainment revenue for Q3 was 1.49 billion yuan, a decrease of 2.7% year-on-year, primarily due to adjustments in live interaction features and stricter compliance procedures, though it has stabilized [2] - Q4 social entertainment revenue is expected to reach 1.50 billion yuan, reflecting an 8% year-on-year decline [2] Profit Forecast and Valuation - The company anticipates net profits attributable to shareholders for 2025-2027 to be 11.2 billion, 10.1 billion, and 11.4 billion yuan respectively, with adjustments made to membership payment rates and ARPPU [3] - A target price of 87.50 HKD (79.74 RMB) is set for 2026, based on a 24x P/E ratio, maintaining a "buy" rating [3]

Core Viewpoint - The company reported strong Q3 2025 results, exceeding Bloomberg expectations with significant revenue and profit growth driven by online music subscription services and non-subscription revenue streams [1][2]. Financial Performance - Q3 2025 revenue reached 8.46 billion yuan, a year-over-year increase of 20.6% and a quarter-over-quarter increase of 0.2% [1] - Net profit attributable to shareholders was 2.15 billion yuan, up 36% year-over-year but down 11% quarter-over-quarter [1] - Non-GAAP net profit stood at 2.48 billion yuan, reflecting a year-over-year increase of 28% and a quarter-over-quarter decrease of 6% [1] - Operating costs increased by 18.8% year-over-year, primarily due to rising costs in offline performances, IP-related expenses, and advertising agency fees [1] - Gross margin was 43.5%, showing a year-over-year increase of 0.9 percentage points but a quarter-over-quarter decrease of 0.9 percentage points [1] Business Segmentation - Online music service revenue was 6.97 billion yuan, a year-over-year increase of 27.2% and a quarter-over-quarter increase of 1.7% [2] - Subscription revenue within online music was 4.50 billion yuan, up 17.2% year-over-year and 2.7% quarter-over-quarter, driven by an increase in ARPPU [2] - Non-subscription revenue surged to 2.47 billion yuan, a year-over-year increase of 50.6% [2] User Metrics - The online music monthly active users (MAU) reached 551 million, a year-over-year decrease of 4% [2] - The number of paying users increased to 126 million, a year-over-year increase of 6% and a quarter-over-quarter increase of 1% [2] - The paying rate was 22.8%, up 2.2 percentage points year-over-year [2] Strategic Initiatives - The company is expanding its artist matrix by closely collaborating with K-POP and introducing 15 Chinese label artists [3] - A strategic partnership with Weverse, a well-known overseas fan service platform, will enhance user engagement on QQ Music [3] Profit Forecast - Revenue projections for 2025-2027 are 32.979 billion yuan, 36.856 billion yuan, and 40.732 billion yuan respectively, with net profits expected to be 11.127 billion yuan, 9.837 billion yuan, and 11.156 billion yuan [3] - The company maintains a "buy" rating based on the anticipated growth in online music paid users and ARPPU, alongside strong performance in non-subscription revenue [3]

Core Insights - The emergence of Qishui Music as a significant player in the music streaming industry is reshaping the competitive landscape, prompting established giants like Tencent Music and NetEase Cloud Music to reassess their market positions [1][2][9] User Growth and Market Dynamics - Qishui Music has rapidly grown to 120 million active users by September 2025, positioning itself as the fourth largest player in the industry, following Tencent Music, QQ Music, and NetEase Cloud Music [1][4] - Tencent Music's stock fell by 11% following its Q3 2025 earnings report, despite reporting a total revenue of 8.46 billion yuan, a year-on-year increase of 20.6% [1][8] - The user overlap between Qishui Music and traditional platforms like QQ Music and NetEase Cloud Music is only 2%-3%, indicating that Qishui Music is attracting new users rather than merely redistributing existing ones [9][10] Business Model and Revenue Streams - Qishui Music employs a "free + subscription" model, significantly lowering the barriers to entry for users, which contrasts with the traditional subscription-based revenue model of Tencent Music and NetEase Cloud Music [11][13] - Tencent Music's subscription revenue accounted for 53.2% of its total revenue in Q3 2025, while Qishui Music's approach focuses on user engagement through low-cost membership options and promotional offers [11][13] Competitive Strategies - Qishui Music leverages its integration with Douyin (TikTok) to enhance user engagement and retention, with 38% of its users also active on Douyin [4][6] - The platform's algorithm-driven recommendations and short video experiences have proven effective in attracting users, leading to a 90.7% year-on-year increase in active users as of September [6][8] Industry Implications - The loosening of exclusive music copyright agreements has allowed Qishui Music to enter the market more effectively, capitalizing on the shift towards shared rights among platforms [2][3] - The competitive pressure from Qishui Music is forcing Tencent Music and NetEase Cloud Music to innovate and adapt their business models to retain users and market share [17]

Investment Rating - The report maintains a "Buy" rating for Tencent Music-SW (01698) [1] Core Insights - The increase in ARPPU has driven subscription revenue growth, while non-subscription business has achieved breakthroughs [2][6] - For Q3 2025, the company reported revenue of 8.46 billion yuan, a year-over-year increase of 20.6%, and a net profit attributable to shareholders of 2.15 billion yuan, up 36% year-over-year [6][11] Financial Performance - Q3 2025 revenue of 8.46 billion yuan, with a year-over-year growth of 20.6% and a quarter-over-quarter growth of 0.2% [6] - Net profit attributable to shareholders reached 2.15 billion yuan, reflecting a year-over-year increase of 36% [6] - Non-GAAP net profit was 2.48 billion yuan, up 28% year-over-year [6] - Operating costs increased by 18.8% year-over-year, primarily due to rising costs in offline performances, IP-related expenses, and advertising agency fees [6] - Gross margin stood at 43.5%, with a year-over-year increase of 0.9 percentage points [6] Business Segmentation - Online music service revenue for Q3 2025 was 6.97 billion yuan, a year-over-year increase of 27.2% [7] - Subscription revenue within online music reached 4.5 billion yuan, up 17.2% year-over-year [7] - Non-subscription revenue surged to 2.47 billion yuan, a year-over-year increase of 50.6% [7] User Metrics - The number of paid users reached 126 million, a year-over-year increase of 6% [7] - The ARPPU for Q3 2025 was 11.9 yuan, reflecting a year-over-year increase of 10% [7] Future Projections - Revenue forecasts for 2025-2027 are 32.98 billion yuan, 36.86 billion yuan, and 40.73 billion yuan respectively [11] - Projected net profit for the same period is 11.13 billion yuan, 9.84 billion yuan, and 11.16 billion yuan respectively [11] - The report anticipates continued growth driven by an increase in paid users and ARPPU, alongside strong performance in non-subscription business [11]

Core Viewpoint - Tencent Music's Q3 performance exceeded expectations, driven by strong growth in non-subscription business and stable subscription growth [1] Financial Performance - Revenue increased by 21% year-on-year, with non-subscription business growing by 51% year-on-year and subscription business growing by 17% year-on-year [1] - Non-GAAP net profit exceeded expectations by 4% [1] Investment Outlook - The company is viewed positively due to its strong content and services, establishing a solid competitive moat [1] - The target price for US stocks has been revised down from $29.2 to $25.6, maintaining a "Buy" rating [1]

Investment Rating - The investment rating for Tencent Music (TME.N) is "Outperform the Market" [5][27]. Core Views - Tencent Music's online music business is experiencing steady growth, with a revenue increase of 20.6% year-on-year in Q3 2025, reaching 8.46 billion yuan. The adjusted profit margin also improved by 1.6 percentage points year-on-year [1][9]. - The company is expanding into the broader music sector, which is expected to drive future growth. The focus for 2026 will be on investments in this area, including the acquisition of Himalaya, which is anticipated to enhance ARPPU and contribute to profit growth [3][25]. - The subscription business is showing strong performance, with a 17.2% year-on-year revenue growth in Q3 2025, and the monthly ARPPU increased by 10.2% year-on-year to 11.9 yuan [2][17]. Summary by Sections Financial Performance - In Q3 2025, Tencent Music achieved total revenue of 8.46 billion yuan, a year-on-year increase of 20.6% and a quarter-on-quarter increase of 0.2%. Online music revenue accounted for 82% of total revenue [1][9]. - The gross margin for Q3 2025 was 43.5%, up 0.9 percentage points year-on-year but down 0.9 percentage points quarter-on-quarter, primarily due to the development of offline events [1][9]. - Adjusted net profit for Q3 2025 was 2.48 billion yuan, reflecting a year-on-year increase of 27.7% [1][9]. Subscription Business - The subscription revenue reached 4.5 billion yuan in Q3 2025, growing 17.2% year-on-year, with a net increase of 1.3 million paying users, resulting in a payment rate of 22.8% [2][17]. - The number of online music paying users was 126 million, an increase of 5.6% year-on-year [2][17]. Other Online Music Revenue - Other online music services, including advertising and digital albums, generated 2.47 billion yuan in revenue, a significant year-on-year increase of 50.5% [2][21]. - The advertising business is expanding its product offerings, and offline events, such as concerts, are contributing to revenue growth [2][21]. Social Entertainment Business - Revenue from social entertainment and other services was 1.49 billion yuan in Q3 2025, showing a decline of 2.7% year-on-year, but the decline is narrowing [2][24]. Financial Forecasts - The adjusted net profit forecasts for 2025-2027 are 9.6 billion, 10.9 billion, and 12.2 billion yuan, respectively, with a slight downward adjustment of 1-4% [3][25]. - The company is expected to maintain a strong market position with significant growth potential in the broader music sector [3][25].

Investment Rating - The report maintains a "Buy" rating for Tencent Music [4][6]. Core Views - The growth of the fan economy is expected to accelerate, leading to an increase in the company's membership ARPPU due to the rising proportion of SVIP bundled packages [4]. - The projected net profits for the years 2025 to 2027 are estimated at 11.2 billion, 10.1 billion, and 11.4 billion CNY respectively, with adjustments made to previous forecasts based on financial report updates [4]. - A target price of 87.50 HKD (approximately 79.74 CNY) is set for 2026, based on a P/E ratio of 24 times [4]. Financial Performance Summary - For Q3 2025, Tencent Music reported revenue of 8.463 billion CNY, a year-on-year increase of 21%, exceeding Bloomberg's expectations by 2.8% [11]. - The gross margin for Q3 2025 was 43.5%, up 0.9 percentage points year-on-year, driven by growth in music subscription and advertising service revenues [11]. - The adjusted net profit attributable to shareholders for Q3 2025 was 2.41 billion CNY, a 33% increase year-on-year, also surpassing Bloomberg's expectations by 3.7% [11]. - Online music revenue reached 6.97 billion CNY in Q3 2025, reflecting a 27% year-on-year growth, with membership revenue contributing 4.49 billion CNY, an 18% increase [11]. - The ARPPU for Q3 2025 was 11.9 CNY/month, a 12% increase year-on-year, with expectations for further growth in Q4 2025 [11]. Revenue Breakdown - Non-subscription revenue for Q3 2025 was 2.48 billion CNY, a significant 48% increase year-on-year, attributed to strong performance in concerts and innovative advertising formats [11]. - Social entertainment revenue for Q3 2025 was 1.49 billion CNY, a slight decrease of 2.7% year-on-year, but is expected to stabilize in Q4 2025 [11]. Future Projections - The report anticipates that the fan economy will continue to drive revenue growth, with expectations for Q4 2025 total revenue to reach approximately 8.45 billion CNY, maintaining high year-on-year growth [11]. - The projected revenue for 2025 is 32.706 billion CNY, with a year-on-year growth rate of 15.2% [14].

Market Overview - The Hang Seng Index rose by 1.26% this week, with a trading volume of HKD 1.16 trillion[1] - The Hang Seng Technology Index decreased by 0.42%, while the Hang Seng China Enterprises Index increased by 1.41%[1] - Net inflow from southbound trading was HKD 22.6 billion this week, totaling HKD 1,214.3 billion year-to-date, which is 164.5% of the total net inflow for 2024[1] Sector Performance - The top two performing sectors this week were Consumer Staples and Paper & Packaging, with weekly gains of 10.27% and 6.66% respectively[1] - Notable stocks in the Consumer Staples sector included Jiangsu Hongxin, Alpha Enterprises, and JD Health, with increases of 13.21%, 11.54%, and 6.59% respectively[1] - Other strong performing sectors included Pharmaceuticals & Biotechnology (5.4%) and Durable Goods (5.03%)[1] AI Developments - GPT-5.1 was officially released on November 13, featuring enhanced models for improved communication and reasoning capabilities[2] - Baidu launched the Wenxin 5.0 model, which supports multimodal input and output, boasting over 2.4 trillion parameters[2] Company Earnings - Tencent reported Q3 2025 revenue of HKD 192.9 billion, a 15% year-on-year increase, with a net profit of HKD 63.1 billion, up 19%[8] - JD Group achieved Q3 2025 revenue of HKD 299.1 billion, a 14.9% increase year-on-year, but net profit fell to HKD 5.3 billion from HKD 11.7 billion in the previous year[8] - Bilibili's Q3 2025 revenue was HKD 7.69 billion, a 5% increase, with adjusted net profit soaring 233% to HKD 0.79 billion[8] Investment Recommendations - The report suggests focusing on platform-based internet companies with computational resources and model capabilities, including Tencent, Kuaishou, Alibaba, Xiaomi, Baidu, and Meituan[4] - AI ecosystem companies with model or application capabilities are also recommended, such as Qunar, Meitu, JD Health, and Zhihu[4] Risks - Geopolitical risks may impact overseas revenue and competitiveness, potentially affecting stock prices[26] - Regulatory risks in the internet sector could influence industry and individual stock performance[26] - Consumer recovery may not meet expectations, posing a risk to the consumer sector[26]

Core Viewpoint - The company reported a slight beat in Q3 2025 earnings, driven by strong performance in non-subscription music business [1][2] Performance Review - Q3 2025 revenue reached 8.46 billion yuan, a year-on-year increase of 20.6% - Non-IFRS net profit attributable to the parent company was 2.41 billion yuan, up 32.6%, slightly above the expected 2.30 billion yuan, mainly due to better-than-expected performance in non-subscription music [1] Development Trends - Subscription business shows profitability resilience, while non-subscription business has significant growth potential - Subscription Revenue: Q3 2025 revenue increased by 17.2% to 4.49 billion yuan, with paid users increasing by 1.3 million to 126 million, and ARPPU rising by 10.2% to 11.9 yuan/month. Expected growth in Q4 2025 includes an additional 1.3 million paid users and ARPPU rising to 12.1 yuan/month [1] - Non-Subscription Revenue: Q3 2025 revenue surged by 50.3% to 2.48 billion yuan, with concert and artist economy revenues growing rapidly. The company anticipates a 35.7% year-on-year revenue growth for the full year [1] Profitability and Valuation - Q3 2025 gross margin decreased by 0.9 percentage points to 43.5%, with stable sales expenses and a 5.3% year-on-year increase in management expenses. The company indicated that investments in offline performances and IP economy are crucial for long-term growth [2] - The company maintains a "one body, two wings" strategy to explore the full value of the industry chain, enhancing collaboration with global record companies and innovating product functions and services [2] - Adjustments to profit forecasts for 2025 and 2026 reflect new business growth and potential investments, with Non-IFRS net profit estimates revised to 9.63 billion yuan and 10.75 billion yuan respectively. Current P/E ratios for US and Hong Kong stocks are 24/21 times and 25/22 times for 2025/2026 [2]

Core Viewpoint - The application "Changba," developed by Beijing Xiaochang Technology Co., Ltd., has been highlighted in a recent official report for violating user privacy by illegally collecting personal information, which has reignited public scrutiny of the app [1][3][5]. Group 1: User Privacy Violations - Changba was named in a report by the Ministry of Industry and Information Technology for "illegally collecting personal information," alongside 39 other apps [1][3]. - The app's data collection practices extend to sensitive information in a vehicle environment, including user location and in-car conversations, raising the severity of its violations [2][5]. - The app's privacy policy includes the collection of facial features, fingerprints, bank account details, and voice data, as well as permissions to access the user's contacts [3][5]. Group 2: User Complaints and Customer Service Issues - As of November 14, 2025, Changba has received a total of 629 complaints on the Black Cat Complaints platform, with issues ranging from unauthorized charges to poor customer service [6][10]. - Users have reported being charged for services they did not use, and complaints about unresponsive customer service have been prevalent [10][11]. Group 3: Competitive Landscape and Market Position - Changba's initial success was marked by rapid user growth, reaching over 1 million users within a week of its launch in 2012, but it has since struggled against competitors like Tencent's "Quanmin Kge" [14][18]. - The competitive pressure from Quanmin Kge, which benefits from a larger user base and better music licensing, has significantly impacted Changba's market share [17][18]. - Despite attempts to innovate and expand into offline KTV and other areas, Changba has not achieved its growth targets and has seen a decline in user engagement [20][25]. Group 4: Future Challenges and Opportunities - The company faces the challenge of balancing data collection with user privacy, especially as it seeks to expand into new areas like smart vehicles and the metaverse [27][29]. - Changba's recent focus on enhancing audio-visual interaction technology aims to create an immersive karaoke experience, but results have yet to show significant improvement [27][29]. - The need for Changba to redefine its unique market position and regain user trust is critical for its survival in a competitive landscape [29][30].