Investment Rating - The report maintains a "Buy" rating for NetEase Cloud Music (9899.HK) [4] Core Insights - The company's revenue for Q1 2025 was 1.86 billion RMB, a year-on-year decrease of 8.4%, primarily due to a decline in social entertainment business revenue, while online music revenue showed resilience [1] - The gross profit for Q1 2025 was 680 million RMB, with a gross margin of 36.7%, reflecting a year-on-year decline of 1.3 percentage points but a quarter-on-quarter increase of 4.8 percentage points [1] - The company emphasizes the importance of ROI in content procurement and has seen a continuous improvement in gross margin due to operational leverage [1] Summary by Sections Financial Performance - For Q1 2025, NetEase Cloud Music achieved a gross profit of 680 million RMB, with a gross margin of 36.7%, down 1.3 percentage points year-on-year but up 4.8 percentage points quarter-on-quarter [1] - The actual gross profit for Q1 2024 was approximately 670 million RMB, leading to a year-on-year growth of about 2.0% in actual gross profit for Q1 2025 [1] Business Strategy - The company focuses on independent musicians, being the largest online incubator for independent musicians in China, with over 773,500 registered independent musicians and approximately 4.4 million music tracks uploaded by the end of 2024 [2] - NetEase Cloud Music has strengthened its copyright content by enhancing cooperation with copyright holders, including a preliminary consensus with South Korea's SM Entertainment for copyright renewal [2] Product Development - The company has made adjustments to its platform based on user feedback, enhancing user experience through various product optimizations and introducing new features like "Listen Together with Strangers" to strengthen social attributes [3] - In March 2025, the company launched the DeepSeek feature, marking a significant step in AI integration within the music industry [3] Profitability Forecast - The report predicts adjusted net profit for 2025 to be 1.901 billion RMB, with a growth rate of 11.8% [5] - The adjusted EPS for 2025 is projected to be 8.75 RMB, with a P/E ratio of 20 [5]
网易云音乐（09899）：25Q1财务数据点评：社交业务下降影响收入，毛利率进一步提升