TME(US:TME) SPDB International·2025-05-15 07:30Investment Rating - The report maintains a "Buy" rating for Tencent Music (TME.US/1698.HK) with a target price of $18 or HKD 70, indicating a potential upside of 26% and 28% respectively from current prices [3][5][7]. Core Insights - The company's revenue for Q1 2025 reached RMB 73.6 billion, a year-on-year increase of 8.7%, slightly above market expectations. The adjusted net profit was RMB 21.2 billion, exceeding market expectations by 5.1% [1][3]. - Online music service revenue grew by 16.1% year-on-year, driven by subscription and advertising revenue growth. The music subscription ARPPU reached RMB 11.4, surpassing expectations due to a reduction in discounts for regular members and strong performance from SVIP subscriptions [2][3]. - The report anticipates that ARPPU will become the main driver of music subscription revenue growth in the coming years, with projections of RMB 11.6 in Q2 2025 and RMB 12.1 by Q4 2025 [2]. Financial Projections - The report slightly raises revenue forecasts for FY25E and FY26E by 1% and 0% respectively, and adjusts the net profit forecasts upward by 3% and 1% [3]. - Financial metrics for FY25E include expected revenue of RMB 31.16 billion, operating profit of RMB 12.79 billion, and adjusted net profit of RMB 8.90 billion [4][10]. Market Performance - The current stock price for Tencent Music is $14.33, with a 52-week price range of $9.41 to $15.77, and a total market capitalization of $24.59 billion [5][6]. - The report indicates a strong market position for Tencent Music, supported by its leading industry status and growth in subscription services [3][4].