Core Viewpoint - Daiwa upgraded Tencent Music (01698) from "Hold" to "Outperform" due to strong execution in Super VIP (SVIP) and fan economy monetization, maintaining disciplined spending, and new projects driving revenue growth [1] Group 1: Financial Performance - Tencent Music's Q2 2025 performance reflects strong execution in SVIP and fan economy monetization [1] - Daiwa raised the 12-month target price from HKD 66 to HKD 106 based on a revised price-to-earnings ratio of 25 times, up from 18 times [1] - Revenue forecasts for 2025 to 2027 were increased by 3% to 4%, and earnings per share were raised by 2% to 7% due to better-than-expected online music revenue growth and operating profit margins [1] Group 2: Strategic Initiatives - The introduction of a new incentive advertising membership price tier (RMB 10 per month, auto-renewing at RMB 5, with a first-time discount of RMB 1) is expected to drive advertising revenue growth faster than subscription revenue [1] - The potential acquisition of Ximalaya by Tencent Music may strategically complement its music business and strengthen the SVIP product [1] - If approved by market regulators, the acquisition could contribute an estimated 5% to 10% incremental profit in 2026, which is not yet included in Daiwa's forecasts [1] Group 3: Market Outlook - Daiwa anticipates stronger profit growth for Tencent Music in 2026 to 2027, exceeding market consensus by 15% to 17% [1]

Core Viewpoint - Tencent Music's performance in Q2 2025 exceeded expectations with a revenue growth of 17.9% to 8.4 billion RMB, surpassing market forecasts by 6% [1] - The company maintains a "Buy" rating with a target price increase from 85 HKD to 105 HKD, based on a projected 2026 P/E ratio of 26 times, in line with peers [1] Group 1 - Non-GAAP operating profit increased by 31.4% to 3.2 billion RMB, with an operating profit margin up by 4 percentage points to 38% [1] - Non-GAAP net profit rose by 33% to 2.6 billion RMB, exceeding market expectations by 16%, with a net profit margin expanding by 4 percentage points to 31% [1] - The company anticipates continued robust growth in subscriptions and advertising through the second half of 2025, driven by rich content offerings [1] Group 2 - Subscription revenue is projected to grow by 15.7% in 2025, supported by ongoing content upgrades and increased penetration of Super VIP (SVIP) [2] - The management's long-term goal remains at 150 million subscribers, with an average revenue per paying user (ARPPU) target of 15 RMB [2] - The acquisition of Ximalaya for 2.7 billion RMB is expected to enhance user base expansion and paid conversion rates, with impacts anticipated from Q3 2025 [2] Group 3 - Revenue estimates for Q3 2025 and the full year have been raised by 2% and 3% respectively, indicating year-on-year growth of 12% and 13% [2] - Non-GAAP net profit forecasts for Q3 2025 and the full year have been increased by 7% and 8%, suggesting year-on-year growth of 33% and 22% [2] - The company is expected to maintain a net profit margin of approximately 31% for both Q3 and the full year, reflecting ongoing profitability and streamlined social entertainment operations [2]

Core Viewpoint - Tencent Music (TME.US) has shown significant stock performance, with a pre-market increase of 2.6% and a notable rise of 11.85% in the previous trading session, reaching a new high since March 2021 [1] Financial Performance - In Q2, Tencent Music achieved total revenue of 8.44 billion yuan, representing a year-on-year growth of 17.9%, exceeding market expectations [1] - The adjusted net profit for the same period was 2.64 billion yuan, reflecting a year-on-year increase of 33% [1] Analyst Ratings and Price Targets - Daiwa Securities maintained a "Buy" rating for Tencent Music, raising the target price from 85 HKD to 105 HKD [1] - The firm forecasts a 15.7% annual growth in subscription revenue by 2025, driven by continuous content upgrades and increased penetration of Super VIP (SVIP) services [1] - Additionally, another report upgraded Tencent Music's rating from "Hold" to "Outperform," increasing the 12-month target price from 66 HKD to 106 HKD based on a revised price-to-earnings ratio of 25 times [1]

Core Viewpoint - The U.S. stock market saw a collective rise in popular Chinese concept stocks before the market opened, indicating positive investor sentiment towards these companies [1] Group 1: Stock Performance - Bilibili experienced a rise of over 5% [1] - NetEase and Kingsoft Cloud both increased by more than 4% [1] - Ctrip, Tiger Brokers, Li Auto, NIO, Futu, and Quantum Song all saw gains exceeding 3% [1] - Alibaba, Tencent Music, and Pinduoduo rose by more than 2% [1]

Core Insights - Tencent Music's stock price surged over 17%, reaching a historical high of HKD 104 per share, with a market capitalization of HKD 315 billion, driven by strong Q2 2025 performance [1] - The company reported total revenue of CNY 8.44 billion, a year-on-year increase of 17.9%, and adjusted net profit of CNY 2.64 billion, up 33% [1] - The growth was primarily fueled by robust online advertising revenue and strong sales from merchandise and live concerts [1] Revenue Breakdown - Online music business remained the core growth engine, generating revenue of CNY 6.85 billion, a 26.4% year-on-year increase [1] - Online music subscription revenue grew by 17.1% to CNY 4.38 billion, with paid user count reaching 124.4 million and average revenue per paying user (ARPPU) increasing from CNY 10.7 to CNY 11.7 [1] Membership and Strategic Initiatives - Tencent Music's super membership reached 15 million, marking a significant milestone [2] - The company expanded its business by collaborating with domestic and international record companies and artists, producing songs for popular films and hosting major concerts [2] - Tencent Music is planning acquisitions of South Korea's SM Entertainment and Himalaya, aiming to enhance K-pop and long audio user engagement, which could drive super membership subscriptions [2] Challenges - Social entertainment revenue declined by 8.5% to CNY 1.588 billion during the reporting period, but the overall performance remained positive due to better-than-expected online music business results [2]

Core Viewpoint - Daiwa's report indicates that Tencent Music's Q2 performance reflects strong execution in monetizing Super VIP (SVIP) and fan economy, leading to an upgrade of the stock rating from "Hold" to "Outperform" due to new projects driving revenue growth [1] Group 1: Financial Performance - Tencent Music's Q2 results show a robust execution in SVIP and fan economy monetization while maintaining disciplined spending [1] - The 12-month target price has been raised from HKD 66 to HKD 106 based on a revised price-to-earnings ratio of 25 times, up from 18 times [1] Group 2: Revenue Growth Drivers - Concerns regarding Tencent Music's strategy to attract/retain price-sensitive users have been alleviated with the introduction of new incentive advertising membership pricing, which is expected to drive advertising revenue growth faster than subscription revenue [1] - The acquisition of Ximalaya may serve as a strategic complement to its music business and strengthen the SVIP product, with potential to leverage Tencent's distribution network to reduce sales and marketing costs [1] Group 3: Earnings Forecast Adjustments - Daiwa has raised revenue forecasts for 2025 to 2027 by 3% to 4% and adjusted earnings per share estimates upward by 2% to 7% due to better-than-expected online music revenue growth and operating profit margins [1] - The potential acquisition is estimated to contribute an incremental profit of 5% to 10% by 2026, pending regulatory approval, which is not yet included in Daiwa's forecasts [1]

Core Viewpoint - Tencent Music's Q2 performance was strong, with revenue growth of 17.9% year-on-year to 8.4 billion, exceeding market expectations by 6% [1] - Non-GAAP net profit increased by 33% year-on-year to 2.6 billion, surpassing market expectations by 16%, with a net profit margin expansion of 4 percentage points to 31% [1] Group 1 - The firm maintains a "Buy" rating for Tencent Music, raising the target price from 85 HKD to 105 HKD, based on a projected 2026 price-to-earnings ratio of 26 times, in line with peers [1] - The firm forecasts a 15.7% year-on-year growth in Tencent Music's subscription revenue for 2025, driven by strong pricing power from ongoing content upgrades and increased penetration of Super VIP (SVIP) [1]

Market Performance - The Hang Seng Index rose by 1.88% to 25,439.91 points, while the Hang Seng Tech Index increased by 2.35% to 5,566.72 points, and the China Enterprises Index gained 1.86% to 9,082.52 points [1][2] - Major tech stocks saw significant gains, with Alibaba up 4.37%, Tencent Holdings up 3.13%, and JD.com up 2.85% [2] Company Highlights - Tencent Music's stock surged over 15% after reporting Q2 2025 unaudited financial results, with total revenue of RMB 8.44 billion (approximately USD 1.18 billion), a year-on-year increase of 17.9%. The net profit attributable to equity holders was RMB 2.41 billion (approximately USD 336 million), up 43.2% year-on-year [2] - CICC raised its Non-IFRS net profit estimates for Tencent Music for 2025 and 2026 by 6.8% and 13.0% to RMB 9.46 billion and RMB 11.21 billion, respectively, maintaining an outperform rating [3] Sector Developments - The biotechnology sector experienced a significant rise, with North Sea Health rising over 34% after announcing a share issuance to Baiyang Pharmaceutical at a discount [4] - Chinese brokerage stocks saw widespread gains, with Guolian Minsheng rising over 7%. Donghai Securities noted that the multi-tiered capital market system is gradually improving, which may enhance the attractiveness of the capital market [4]

Core Viewpoint - The report from CICC indicates that Tencent Music's non-subscription business has outperformed expectations, leading to an upward revision of Non-IFRS net profit forecasts for 2025 and 2026 by 6.8% and 13.0% to 9.46 billion and 11.21 billion yuan respectively [1] Group 1: Financial Performance - In Q2 2025, Tencent Music reported revenue of 8.44 billion yuan, a year-on-year increase of 17.9%, surpassing CICC's expectation of 8 billion yuan and the consensus estimate of 7.99 billion yuan [2] - The Non-IFRS net profit for Q2 2025 was 2.57 billion yuan, reflecting a 37.4% year-on-year growth, exceeding both CICC's forecast of 2.26 billion yuan and the consensus estimate of 2.27 billion yuan [2] - The gross margin for Q2 2025 increased by 0.3 percentage points to 44.4%, while sales and management expenses remained relatively stable [4] Group 2: Revenue Breakdown - Online music revenue in Q2 2025 reached 6.85 billion yuan, a 26.4% year-on-year increase, with subscription revenue growing by 17% to 4.38 billion yuan and the number of paying users increasing by 1.5 million to 124 million [3] - The non-subscription business saw a remarkable growth of 47% year-on-year, generating 2.47 billion yuan, driven by advertising, concerts, and artist-related merchandise [3] - Social entertainment revenue for Q2 2025 was 1.59 billion yuan, with expectations for stabilization in Q3 and Q4 2025 [3] Group 3: Strategic Initiatives - The company is enhancing its upstream and user platform capabilities through a "one body, two wings" strategy, deepening collaborations with record labels to enrich content offerings [5] - Tencent Music is hosting concerts for top Korean artists and planning to invite popular Chinese artists to engage users, which is expected to drive SVIP conversion [5] - The potential acquisition of Ximalaya is anticipated to create significant collaboration opportunities in subscription and advertising, further solidifying the company's market position [5]

Group 1 - Kangji Medical (09997) resumed trading with a nearly 1% increase, announcing a privatization agreement with Knight Bidco Limited, which will make Kangji a wholly-owned subsidiary and delist from the Hong Kong Stock Exchange after completion [1] - Tencent Music (01698) opened high with over a 15% increase, reporting a 30% year-on-year increase in adjusted net profit for Q2 ending June 30, 2025, driven by high-quality growth in its online music business [1] - Mingyuan Cloud (00909) opened over 2% higher, announcing a cash acquisition of 100% equity in ASIOT Co., Ltd. for 700 million yen by its subsidiary MytePro Japan [1] Group 2 - Yuedu Group (00772) surged over 15%, reporting a 68.5% year-on-year increase in net profit for the first half of the year, with strong performance in IP for premium films and animations, and significant growth in the emerging short drama sector [2] - Minmetals Resources (01208) rose over 9%, with net profit increasing 15 times year-on-year, attributed to higher copper production and rising prices of copper, gold, silver, and zinc [2] - Beihai Kangcheng-B (01228) increased over 31%, announcing a strategic cooperation agreement with Baiyang Pharmaceutical for exclusive commercial services in promoting several products in mainland China, Hong Kong, and Macau [2] Group 3 - Zhonghui Biotech-B (02627) surged over 25%, as its vaccine product was included in the preliminary review list of the national commercial health insurance innovative drug catalog [2] - Gilead Sciences-B (01672) rose over 5%, announcing promising efficacy results for its candidate drug ASC47 in combination with teriparatide for obesity treatment in diet-induced obesity mouse studies [3] - Dongying Travel (06882) fell over 9%, issuing a profit warning with expected net profit of approximately 6 million HKD for the first half of 2025, down about 82% from 34 million HKD in the same period last year [3] Group 4 - Kodak (KODK.US) dropped 19.91% after reporting a shift from profit to loss in Q2, raising concerns about its ability to execute critical financing measures [4] - Niu Technologies (NIU.US) rose 11.69%, reporting a turnaround to profitability in Q2 and projecting Q3 revenue between 1.433 billion to 1.638 billion CNY, a year-on-year increase of 40% to 60% [4] - Huya (HUYA.US) increased by 4.53%, preparing to release its financial report, with a strong growth trajectory in gaming-related services [4] Group 5 - ON Running (ONON.US) rose 8.95%, reporting a 32% year-on-year increase in Q2 sales and projecting annual net sales of at least 2.91 billion Swiss francs, exceeding previous expectations [6] - Micron Technology (MU.US) increased by 3.26%, significantly raising its Q4 fiscal year 2025 revenue guidance to between 11.1 billion to 11.3 billion USD, with gross margin guidance improved to 44% to 45% [6]