APALT(002540) 观点指数·2024-05-23 03:50Investment Rating - The report assigns a "Buy" rating for Tencent Music Entertainment Group (TME) with a 12-month price target of 62.30 (H-share) [12][14]. Core Insights - The report highlights healthy subscriber and ARPU growth for FY24, with net adds expected to normalize after a strong 1Q performance [2][4]. - Management anticipates further growth in non-subscription revenue streams, particularly in advertising and artist merchandise, aiming for double-digit percentage growth in overall non-subs business in 2024 [8][9]. - The gross profit margin (GPM) target is set at approximately 42% for FY24, with a long-term online music GPM target of 45% [9][10]. Summary by Sections Subscriber Growth - Management reported a net addition of 6.8 million subscribers in 1Q, driven by promotional activities during the Chinese New Year and effective marketing strategies [3][4]. - Future net adds are projected at 3.5 million in 2Q and 3 million in both 3Q and 4Q, leading to a total for the year that is slightly lower than 2023 but significantly higher than 2022 [4][5]. ARPU Growth - The average revenue per user (ARPU) is expected to stabilize with a healthy upward trend, although the year-over-year growth rate for ARPU in 2024 is likely to be lower than in 2023 [7][8]. - The target for ARPU is set to reach RMB 15 over the next 3-5 years, reflecting evolving user payment habits [8][9]. Non-Subscription Business - The report anticipates normalization in advertising growth following a low base in 1Q, with solid progress in digital albums and offline concerts [8][9]. - Management aims for double-digit percentage growth in overall non-subs business in 2024 [8][9]. Margin Expansion - Management maintains a guidance of 42% GPM for FY24, with expectations for continued improvement in online music GPM [9][10]. - The upward margin trend is supported by strong operating leverage, with revenue growth outpacing content costs [9][10].