Investment Rating - The investment rating for the company is "Outperform the Market" [5][8]. Core Views - The online music business is experiencing healthy growth, with cost control and operational efficiency driving continuous improvement in profitability. The company achieved its first annual profit in 2023, despite a 12.5% year-on-year decrease in total revenue to 7.867 billion yuan, primarily due to a cautious operational strategy that reduced live streaming displays and lowered revenue sharing ratios, leading to a 33.6% decline in social entertainment services revenue to 3.516 billion yuan. Conversely, online music service revenue grew by 17.6% to 4.351 billion yuan, supported by strong commercialization performance and improved cost structure [5][6][10]. Summary by Sections Financial Performance - In 2023, the company reported total revenue of 7.867 billion yuan, a decrease of 12.5% year-on-year. The online music service revenue increased by 17.6% to 4.351 billion yuan, while social entertainment services revenue decreased by 33.6% to 3.516 billion yuan. The company achieved a gross profit of 2.103 billion yuan, up 62.6% year-on-year, with a gross margin increase from 14.4% in 2022 to 26.7% in 2023. The adjusted net profit attributable to the parent company was 819 million yuan, marking the first annual profit [5][6][7][10]. User Metrics - The online music segment saw a significant increase in monthly active users (MAU), growing by 16.5 million to 206 million. The subscription revenue rose by 20.2%, and the average revenue per paying user (ARPPU) increased by 4.2% to 6.9 yuan per month. The paid user rate improved by 1.2 percentage points to 21.4% [6][10]. Future Projections - The company is expected to switch to a price-to-earnings (PE) valuation method, forecasting adjusted net profits of 1.065 billion yuan, 1.234 billion yuan, and 1.511 billion yuan for 2024, 2025, and 2026, respectively. The estimated revenue for 2024 is projected to be 8.460 billion yuan, with a year-on-year growth of 7.5% [6][7][10]. Valuation - Based on comparable companies, the company is assigned a dynamic PE range of 20-23 times for 2024, resulting in a fair value range of 109.22 to 125.61 Hong Kong dollars per share [8][10].
在线音乐业务健康增长，成本控制与运营效率提升驱动盈利能力持续改善