Investment Rating - The investment rating for Tencent Music (TME) is currently not specified in the report, but the overall recommendation is to actively monitor the company due to its strong performance and growth potential [2]. Core Views - The report highlights that Tencent Music's Q3 2024 performance met expectations, with total revenue of 70.2 billion yuan, a year-over-year increase of 6.8%. Net profit reached 17.1 billion yuan, up 35.3% year-over-year, while adjusted net profit was 19.4 billion yuan, reflecting a 29.1% increase year-over-year [2]. - The online music service revenue was 54.8 billion yuan, showing a year-over-year growth of 20.4%, driven by strong growth in subscription revenue and advertising services. The subscription revenue alone was 38.4 billion yuan, up 20.3% year-over-year [2]. - The report emphasizes the importance of SVIP membership in enhancing ARPPU (Average Revenue Per Paying User), with SVIP members exceeding 10 million by the end of September 2024, contributing to a higher ARPPU compared to regular members [2]. Summary by Sections Financial Performance - Total revenue for Q3 2024 was 70.2 billion yuan, slightly above the consensus estimate of 70 billion yuan, with a year-over-year growth of 6.8% [2]. - Net profit was reported at 17.1 billion yuan, close to the consensus estimate of 17.2 billion yuan, with a year-over-year increase of 35.3% [2]. - Adjusted net profit reached 19.4 billion yuan, exceeding the consensus estimate of 19.2 billion yuan, marking a year-over-year growth of 29.1% [2]. Revenue Breakdown - Online music service revenue was 54.8 billion yuan, up 20.4% year-over-year, primarily due to strong subscription growth and advertising revenue [2]. - Subscription revenue specifically was 38.4 billion yuan, reflecting a year-over-year increase of 20.3% [2]. - Social entertainment services and other services revenue was 15.4 billion yuan, down 23.9% year-over-year, attributed to adjustments in live interaction features and stricter compliance measures [2]. User Metrics - As of Q3 2024, the number of paying users for online music services reached 119 million, a year-over-year increase of 15.5% [2]. - The report notes a net increase of 2 million paying users in Q3, aligning with the guidance of 1.5 to 2 million [2]. - The ARPPU for online music services was 10.8 yuan, up 4.9% year-over-year, while for social entertainment services, it was 64.8 yuan, down 24.8% year-over-year [2].

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of $16.00 based on discounted cash flow (DCF) valuation methods [11][19]. Core Insights - The company reported a total revenue of RMB 7.02 billion for Q3 2024, a year-on-year increase of 7%, aligning with consensus expectations. Non-IFRS net profit grew by 29% to RMB 1.81 billion, also meeting expectations [1][2]. - The SVIP subscription service has reached a milestone of 10 million users, which is expected to drive future growth in music ARPPU (average revenue per paying user) and overall revenue [1][4]. - Online music revenue increased by 20% year-on-year to RMB 5.48 billion, supported by robust growth in both subscription and non-subscription revenues [1][4]. Revenue Summary - Total revenue for FY24E is projected to be RMB 28.25 billion, with a forecasted growth of 6% for Q4 2024, reaching RMB 7.31 billion [4][10]. - The online music segment is expected to see a 15% increase in revenue for Q4 2024, while social entertainment revenue is anticipated to decline by 17% [4][10]. Profitability Metrics - The gross profit margin (GPM) for Q3 2024 was reported at 42.6%, a year-on-year increase of 6.9 percentage points, attributed to strong growth in music ARPPU and advertising revenue [2][10]. - The non-IFRS net profit margin for Q3 2024 expanded to 25.9%, up 4.4 percentage points year-on-year [2][10]. User Growth and Engagement - The number of paying users increased by 2 million quarter-on-quarter to 119 million, representing a 16% year-on-year growth [1][4]. - The monthly ARPPU for Q3 2024 was RMB 10.8, reflecting a 4% year-on-year increase [1][4]. Financial Forecasts - For FY25E, the company expects further expansion in profit margins, with GPM projected to reach 44.5% and non-IFRS net profit margin at 28.2% [10][12]. - The adjusted net profit for FY25E is forecasted to be RMB 8.79 billion, with a continued focus on balanced growth in music subscription users and ARPPU [10][12]. Market Performance - The company's market capitalization is approximately $17.8 billion, with a 52-week high of $15.49 and a low of $7.43 [5][6]. - The stock has underperformed in the short term, with a 1-month decline of 9.6% and a 6-month decline of 13.4% [6][6].

Investment Rating - The report maintains a "BUY" rating for the company with a target price of US$16.00, indicating a potential upside of 38.5% from the current price of US$11.55 [3][7]. Core Insights - The company reported inline 3Q24 results with total revenue increasing by 7% YoY to RMB7.02 billion and non-IFRS net income growing by 29% YoY to RMB1.81 billion, both in line with estimates [1]. - The number of SVIP subscribers reached 10 million in September 2024, expected to drive future growth in music ARPPU and revenue [1]. - For FY25E, management anticipates accelerated revenue growth and margin improvement, supported by balanced growth in music subscribers and ARPPU [1]. Revenue and Profitability - Total revenue for FY24E is projected at RMB28.254 billion, with a growth forecast of 10.4% for FY25E to RMB31.193 billion and 10.2% for FY26E to RMB34.364 billion [2][4]. - Gross margin is expected to improve from 42.3% in FY24E to 44.5% in FY25E and 45.5% in FY26E, reflecting strong operating leverage and optimized content costs [4][12]. - Non-IFRS net profit is forecasted to grow from RMB7.332 billion in FY24E to RMB8.785 billion in FY25E and RMB10.297 billion in FY26E [2][4]. Online Music Business Performance - Online music revenue increased by 20% YoY to RMB5.48 billion in 3Q24, driven by both subscription and non-subscription revenue growth [1]. - The number of paid users rose by 2 million QoQ to 119 million in 3Q24, with monthly ARPPU increasing by 4% YoY to RMB10.8 [1][6]. - Advertising revenue showed strong growth in 3Q24, supported by ad-supported models and interactive ads [1]. Future Outlook - For 4Q24E, total revenue is expected to rise by 6% YoY to RMB7.31 billion, with online music revenue projected to grow by 15% YoY [1]. - The company plans to control promotion discounts for music subscriptions and drive further SVIP adoption, which is anticipated to support balanced growth in subscribers and ARPPU in FY25E [1]. - Management expects further margin expansion in FY25E, with gross margin projected to reach 43.3% and non-IFRS net margin at 27.0% [1][4].

Financial Data and Key Metrics - The company announced its quarterly financial results before the U.S. market opened, and the earnings release is available on the IR website and via Newswire services [1] Business Line Data and Key Metrics - No specific data or metrics related to individual business lines were provided in the content Market Data and Key Metrics - No specific data or metrics related to individual markets were provided in the content Company Strategy and Industry Competition - The Executive Chairman and CEO will provide an overview of the company's strategies and business updates during the call [2] Management Commentary on Operating Environment and Future Outlook - No specific commentary on the operating environment or future outlook was provided in the content Other Important Information - The call includes forward-looking statements, and non-IFRS measures will be discussed, with explanations and reconciliations provided in the earnings release and SEC filings [3] - The call is being recorded, and participants are currently muted [4] Q&A Session Summary - No Q&A session details were provided in the content

Financial Performance - Total revenue for Q3 2024 was RMB 7.02 billion (USD 1 billion), representing a year-over-year increase of 6.8% driven by strong growth in online music services, partially offset by declines in social entertainment and other service revenues[4]. - Net profit for Q3 2024 was RMB 1.71 billion (USD 244 million), a year-over-year increase of 35.3%, with net profit attributable to equity holders rising by 35.5% to RMB 1.58 billion (USD 226 million)[4]. - Operating profit for Q3 2024 increased by 50.5% year-over-year to RMB 2.14 billion (USD 306 million)[11]. - Gross margin improved from 35.7% in Q3 2023 to 42.6% in Q3 2024, primarily due to strong growth in music subscription and advertising revenue[10]. - Operating expenses decreased by 3.9% year-over-year to RMB 1.22 billion (USD 174 million), with operating expenses as a percentage of total revenue declining from 19.3% to 17.4%[11]. User Metrics - Online music subscription revenue grew by 20.3% year-over-year to RMB 3.84 billion (USD 547 million), with the number of paying users increasing by 15.5% to 119 million, and a net increase of 2 million users quarter-over-quarter[4]. - The number of monthly active users for online music services decreased by 3.0% year-over-year to 576 million, while the number of monthly active users for social entertainment services dropped by 30.2% to 90 million[6]. - The number of super members exceeded 10 million, with higher average revenue per user and engagement compared to non-super members[8]. - The number of online music paying users increased by 15.5% year-over-year to 119 million, with average revenue per paying user per month at RMB 10.8[9]. Cash and Investments - As of September 30, 2024, the total balance of cash, cash equivalents, time deposits, and short-term investments was RMB 36.04 billion (USD 5.14 billion)[4]. - The company repurchased approximately 42.1 million American Depositary Shares for about USD 335.5 million, with around USD 100 million spent in Q3 2024[5]. - As of September 30, 2024, the company had cash and cash equivalents totaling RMB 36.04 billion (USD 5.14 billion), up from RMB 35.03 billion as of June 30, 2024[12]. - The net cash inflow from operating activities for the nine months ended September 30, 2024, was RMB 7,795 million, compared to RMB 5,360 million for the same period in 2023, an increase of 45.49%[31]. - The company reported a net cash outflow from investing activities of RMB 8,142 million for the nine months ended September 30, 2024, compared to RMB 1,670 million for the same period in 2023[31]. Strategic Initiatives - The company expanded partnerships with major record labels and launched strategic collaborations to enhance its content offerings, including a partnership with Galaxy Corporation for K-pop content[7]. - The company implemented operational strategies and enhanced member benefits, driving growth in overall membership and super membership[8]. - The company expects continued growth in online music services and anticipates a recovery in social entertainment services in the upcoming quarters[21]. - The company is focusing on new product development and market expansion strategies to enhance user engagement and revenue growth[21]. Shareholder Information - The company repurchased approximately 42.1 million American Depositary Shares for about USD 335.5 million as part of a USD 500 million share repurchase plan[13]. - Basic earnings per share for the three months ended September 30, 2023, was RMB 0.37, compared to RMB 0.51 for the same period in 2024[26]. - The company reported a diluted earnings per share of RMB 0.37 for the three months ended September 30, 2023, compared to RMB 0.50 for the same period in 2024[26]. Balance Sheet Highlights - As of December 31, 2023, total assets amounted to RMB 75,536 million, increasing to RMB 84,613 million by September 30, 2024, representing a growth of 12.57%[29]. - Non-current assets increased from RMB 45,600 million to RMB 50,087 million, a rise of 9.76%[29]. - Total equity increased from RMB 57,202 million to RMB 65,229 million, reflecting a growth of 14.09%[30]. - The total liabilities increased from RMB 18,334 million to RMB 19,384 million, a rise of 5.73%[30]. - The company's goodwill stood at RMB 19,542 million as of December 31, 2023, slightly increasing to RMB 19,647 million by September 30, 2024[29].

Core Viewpoint - Investors in the Internet - Content sector should consider Tencent Music Entertainment Group (TME) and TechTarget (TTGT) for potential value opportunities, with TME currently presenting a more attractive option [1]. Valuation Metrics - TME has a forward P/E ratio of 17.32, while TTGT has a forward P/E of 18.32, indicating TME may be undervalued compared to TTGT [5]. - TME's PEG ratio is 0.80, suggesting a favorable growth outlook, whereas TTGT's PEG ratio is significantly higher at 10.29 [5]. - TME's P/B ratio stands at 2.34, compared to TTGT's P/B of 3.57, further supporting TME's valuation attractiveness [6]. Earnings Estimates - TME holds a Zacks Rank of 2 (Buy), reflecting positive revisions in earnings estimates, while TTGT has a Zacks Rank of 3 (Hold), indicating a less favorable earnings outlook [3][7]. - The stronger estimate revision activity for TME suggests a more promising earnings trajectory compared to TTGT [7]. Value Grades - TME has a Value grade of B, while TTGT has a Value grade of D, highlighting TME's superior valuation metrics and overall investment appeal [6][7].

Shares of Tencent Music Entertainment Group Sponsored ADR (TME) have gained 2.8% over the past four weeks to close the last trading session at $11.59, but there could still be a solid upside left in the stock if shortterm price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $14.70 indicates a potential upside of 26.8%. The average comprises 15 short-term price targets ranging from a low of $10.50 to a high of $18, with a standard deviation of $2.01. Whil ...

Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a growth stock that can live up to its true potential can be a tough task. In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end. However, the Zacks Growth Style Score (part of the Zacks Style Scores ...

Investors interested in stocks from the Internet - Content sector have probably already heard of Tencent Music Entertainment Group Sponsored ADR (TME) and TechTarget (TTGT) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look. We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis o ...

Investment Rating - The report assigns a "Buy" rating for Tencent Music (1698.HK) as part of its initial coverage [1]. Core Insights - The report highlights continuous optimization of profit margins, with both paid users and ARPU (Average Revenue Per User) showing growth, driving strong performance in the online music subscription business [3][4]. Financial Performance Summary - In Q2 2024, Tencent Music reported revenue of 7.16 billion RMB, a year-over-year decrease of 1.7% but a quarter-over-quarter increase of 5.8%. Operating costs were 4.15 billion RMB, down 13.3% year-over-year and up 3.8% quarter-over-quarter. The IFRS net profit attributable to shareholders was 1.68 billion RMB, up 29.6% year-over-year and 18.3% quarter-over-quarter [3]. - The company achieved a gross margin of 42.0%, an increase of 7.8 percentage points year-over-year, primarily due to strong growth in music subscription and advertising revenues [3]. - As of the end of Q2 2024, the company had cash and cash equivalents totaling 35.03 billion RMB, an increase of 0.85 billion RMB from Q1 2024 [3]. Online Music Business Growth - Online music business revenue reached 5.42 billion RMB in Q2 2024, representing a year-over-year increase of 27.7% and a quarter-over-quarter increase of 8.2%. Subscription revenue was 3.74 billion RMB, up 29.4% year-over-year and 3.3% quarter-over-quarter, driven by growth in paid users and ARPU [4]. - The number of paid users for online music reached 117 million, a year-over-year increase of 17.7% and a quarter-over-quarter increase of 3.1%. The paid user rate was 20.5%, up 3.8 percentage points year-over-year [4]. Social Entertainment Business Adjustments - Social entertainment and other services revenue was 1.74 billion RMB in Q2 2024, down 42.8% year-over-year and 1.4% quarter-over-quarter, primarily due to adjustments in live interaction features and increased market competition [5]. Earnings Forecast and Valuation - The report forecasts revenues of 28.83 billion RMB, 32.00 billion RMB, and 34.95 billion RMB for 2024, 2025, and 2026 respectively. The net profit attributable to shareholders is expected to be 6.34 billion RMB, 7.62 billion RMB, and 8.60 billion RMB for the same years [6][7]. - The adjusted PE ratios are projected to be 21, 18, and 16 for 2024, 2025, and 2026 respectively, indicating a healthy growth outlook for the company [6].