腾讯音乐-SW（01698）：音乐恒久远，腾讯音乐始终相伴

Investment Rating - The report initiates coverage with a "Strong Buy" rating for Tencent Music [1][7]. Core Insights - Tencent Music, backed by Tencent, has a solid content copyright advantage and is leveraging innovative technologies like AIGC to enhance member benefits, which is expected to further increase the paid user rate and ARPU [1][7]. - The company is projected to achieve revenue growth from 310 billion to 376 billion CNY from 2025 to 2027, with adjusted net profits expected to rise from 89 billion to 110 billion CNY during the same period [7][8]. Company Overview - Tencent Music Entertainment Group was established in 2016 through the merger of Tencent and China Music Corporation (CMC), which had long-term agency agreements with nearly 100 record companies, holding a vast library of over 20 million licensed songs [7][13]. - The company has built a strong content barrier by integrating QQ Music and CMC, covering most core copyright resources and maintaining deep collaborations with major labels [7][13]. Core Business - The core business is divided into online music services and social entertainment services, with online music becoming the main growth driver, accounting for over 54% of total revenue in 2024 [7][24]. - Online music service revenue is expected to reach 217.4 billion CNY in 2024, with a year-on-year growth of 25.5%, driven by an increase in paid users and average revenue per user (ARPU) [24][30]. Industry Analysis - Tencent Music is positioned as a leader in the online music market, holding approximately 70% market share, and is compared to global leaders like Spotify and Apple Music, with significant room for growth in paid user rates [7][49]. - The report highlights the increasing maturity of domestic users' willingness to pay, which, combined with diversified member benefits, is expected to drive further growth in paid user rates and ARPU [7][62]. Financial Projections - The report forecasts total revenue for Tencent Music to reach 30,957 million CNY in 2025, with a year-on-year growth of 9%, and adjusted net profit to reach 8,897 million CNY, reflecting a 16% increase [8][24]. - The PE ratio is projected to decrease from 22.8 in 2025 to 18.4 by 2027, indicating a favorable valuation trend [8][24].