Core Viewpoint - The company is focusing on enhancing its competitive advantages and growth potential in the online music market, emphasizing a return to its core music offerings and improving liquidity and profitability [1] Company Overview - The company has undergone significant product changes, including a major revamp of NetEase Cloud Music in 2024, which will close live streaming, social, and e-commerce features to refocus on music recommendations and community experience [1] - The return of major copyrights has strengthened the content offering, covering top artists from Chinese, Japanese, Korean, and Western markets [1] - Liquidity has improved significantly, with the proportion of mid-to-long tail equity increasing from 22.8% at the end of 2022 to 29.7% by the end of 2024, currently exceeding 31% [1] - The company turned a profit in 2023, with continuous improvement in profitability expected for 2024-2025, projecting a gross margin exceeding 36% in the first half of 2025 [1] Industry Analysis - The online music market is projected to reach a scale of 28.8 billion yuan in 2024, with a year-on-year growth of 20%, and a compound annual growth rate (CAGR) of 32% from 2017 to 2024, indicating strong resilience as a "small happiness" consumption category [2] - The primary growth driver in the industry is young users, with nearly 70% of new users on music platforms being born after 2000 [2] - The domestic market is characterized by a stable duopoly between Tencent Music and NetEase Cloud Music, while the overseas market is fragmented with Spotify holding the largest share [2] - Domestic platforms enjoy higher gross margins compared to their overseas counterparts due to the concentrated bargaining power of major overseas record labels [2] Growth Drivers - The company is leveraging its high proportion of young users to implement a targeted copyright strategy, with growth primarily driven by online music and membership increases in the short to medium term, and price increases in the long term [3] - The current paid user wall is only half that of Tencent Music, with a potential increase of 1% in the paid wall expected to add approximately 880,000 members; a mid-term target of 60% could see membership exceed 8.8 million [3] - The company aims for a long-term membership growth target of 100 million, with a 40% payment rate, and anticipates an average revenue per paying user (ARPPU) of 10 yuan/month [3] Profitability Outlook - The company expects steady growth in monthly active users (MAU) and a 15% growth rate in membership, projecting long-term revenues from online music to exceed 14 billion yuan [3] - With improved operational leverage and a higher proportion of self-produced content, gross margins are expected to rise to nearly 47% in the medium to long term, with net profits projected to reach 5-6 billion yuan [3] Financial Projections - The company maintains its revenue forecasts for 2025-2027 at 7.9 billion, 8.8 billion, and 9.8 billion yuan, respectively, with adjusted net profits of 2.86 billion, 2.33 billion, and 2.74 billion yuan, corresponding to price-to-earnings (PE) ratios of 18, 22, and 19 times [4] - The company is confident in its differentiated copyright strategy and its appeal to young users, which lays a solid foundation for long-term growth, with substantial potential for both revenue and profit [4] - A target market capitalization of 76.5 billion HKD for 2026 is set, maintaining a buy rating based on user value and PE levels [4]
网易云音乐(09899.HK)深度：聚焦年轻用户 音乐赛道的成长股-网易云音乐深度之二