Investment Rating - The investment rating for the company is "Outperform the Market" [4][48]. Core Insights - The company is a leading online music streaming platform in China, focusing on a young audience and enhancing its subscription business through an increase in paid user numbers [1][10]. - The competitive landscape is characterized by a duopoly between the company and Tencent Music, with the company holding approximately 27% market share [2][13]. - The company's revenue for 2024 is projected to be 79.5 billion CNY, with a year-on-year growth of 1%, primarily due to a decline in social entertainment services [3][18]. Financial Analysis - The company's core business segments are online music services and social entertainment services, with online music services accounting for 67% of total revenue in 2024 [3][18]. - Online music revenue is expected to reach 53.5 billion CNY in 2024, reflecting a year-on-year increase of 23% [3][18]. - The subscription revenue for 2024 is projected to be 44.6 billion CNY, up 22% year-on-year, driven by an increase in paid user numbers [3][19]. - The company’s gross margin for 2024 is estimated at 34%, an increase of 7 percentage points year-on-year, indicating improved cost management [4][34]. - Adjusted profit for 2024 is expected to be 1.7 billion CNY, representing a significant year-on-year increase of 108% [4][28]. Market Positioning - The company has a strong focus on community engagement and emotional connection with users, leveraging user-generated content and a unique review culture to enhance user retention [2][10]. - The company has been gradually regaining music copyrights since the cancellation of exclusive rights in 2021, which is expected to improve its content offerings [2][14]. Profitability Forecast - Revenue projections for 2025 to 2027 are 86.68 billion CNY, 96.76 billion CNY, and 108.10 billion CNY, respectively, with compound annual growth rates (CAGR) of 9%, 12%, and 12% [9][40]. - Adjusted profits for the same period are forecasted to be 2.1 billion CNY, 2.5 billion CNY, and 3.0 billion CNY, with a CAGR of 21% [9][41]. Valuation - The target price for the company is set between 311 and 354 HKD, reflecting a potential upside of 30% to 48% from the current price [4][42]. - The company is compared favorably against international peers like Spotify and domestic competitor Tencent Music, with a projected PE ratio for 2025 of 29-33x [4][42].