TME(US:TME) HTSC·2025-05-15 02:30Investment Rating - The report maintains a "Buy" rating for the company [4][6]. Core Views - The company reported Q1 2025 earnings with revenue of 7.356 billion RMB, a year-on-year increase of 8.7%, and adjusted net profit of 2.226 billion RMB, up 22.8% year-on-year, slightly exceeding consensus expectations [1][4]. - The growth in revenue and profit is attributed to a robust increase in paid user numbers and a rapid rise in ARPPU driven by the growth of SVIP (super members) [2][4]. - The company is expected to maintain its leading position in the industry, with strong integration capabilities and potential for profit margin expansion [1][4]. Summary by Sections Earnings Performance - In Q1 2025, online music revenue grew by 15.9% to 5.8 billion RMB, with subscription revenue increasing by 16.6% to 4.22 billion RMB. The number of online paid users rose by 8.3% to 122.9 million [2]. - The ARPPU increased by 0.3 RMB to 11.4 RMB, benefiting from the growth of SVIP members and more cautious promotional activities [2]. Profitability Metrics - The company's gross margin for Q1 2025 was 44.1%, up 3.2 percentage points year-on-year, supported by the continuous growth of paid users and a decrease in the revenue-sharing ratio for live streaming [3]. - The report maintains the assumption of profit margin improvement for the full year, with an expected gross margin of 45% for 2025 [3]. Financial Forecasts - The adjusted net profit forecasts for 2025-2027 have been raised to 8.881 billion RMB, 10.192 billion RMB, and 11.159 billion RMB, reflecting increases of 2%, 7%, and 4% respectively [4][11]. - The target price is set at 19.47 USD or 77.37 HKD, based on a 25x PE for 2025E [4][11].