Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 120.00, indicating a potential upside of 11.8% from the current closing price of HKD 107.30 [9]. Core Insights - The first quarter gross margin exceeded expectations, leading to an upward revision of the full-year profit forecast. The company reported a revenue of RMB 3.96 billion for Q1 2024, a year-on-year increase of 3.6%, which aligns with expectations. The gross margin improved by 11 and 3 percentage points year-on-year and quarter-on-quarter, respectively, benefiting from economies of scale in online music, optimized copyright costs, and a reduced revenue-sharing ratio from social income [1][5]. - Membership growth is expected to slightly outperform previous forecasts, with a projected year-on-year increase of 21% in the first half of the year. The average revenue per paying user (ARPPU) is expected to increase by 2% year-on-year, remaining stable quarter-on-quarter [1][5]. - The product revamp focuses on enhancing the core music user experience, although social income may continue to face pressure in the short term. The company has slightly lowered its full-year social income forecast due to a contraction in live streaming traffic [1][5]. - There is still potential for further gross margin improvement as the company continues to expand its copyright content coverage, including partnerships with Korean entertainment companies JYP and Kakao [1][5]. - Based on the better-than-expected gross margin optimization, the adjusted net profit forecast for 2024 has been raised to RMB 1.1 billion, with a target price adjustment based on a 20x P/E ratio for comparable music and copyright companies [1][5]. Financial Summary - Revenue projections for the company are as follows: RMB 7.996 billion for 2024, RMB 8.878 billion for 2025, and RMB 9.921 billion for 2026, with corresponding year-on-year growth rates of 1.6%, 11.0%, and 11.7% respectively [4][10]. - The net profit is expected to be RMB 1.141 billion in 2024, RMB 1.270 billion in 2025, and RMB 1.617 billion in 2026, with significant growth from a loss of RMB 115 million in 2022 to a profit in subsequent years [4][10]. - The gross margin is projected to improve from 27% in 2023 to 34% in 2024, maintaining at 34% in 2025 and increasing to 36% in 2026 [5][10].
云音乐：1季度毛利率优化超预期，上调全年盈利预期