Core Viewpoint - The report from Jefferies indicates that Tencent Music (01698) is on track to meet its revenue and non-IFRS profit forecasts for Q3, driven by quality growth and SVIP services, with a "Buy" rating maintained [1] Group 1: Revenue and Profit Forecasts - Tencent Music is expected to achieve total revenue of 8.2 billion RMB in Q3, representing a year-on-year growth of 17% [1] - The company is projected to have a gross profit of approximately 3.59 billion RMB, with a gross margin reaching 43.8% [1] - Other revenue is anticipated to grow by 35% year-on-year, estimated at 2.2 billion RMB [1] Group 2: User Growth and Subscription Services - The forecast for the music subscription business includes a net addition of approximately 1.3 million users in Q3 [1] - The average revenue per user (ARPU) for the quarter is expected to be 11.9 RMB [1] Group 3: Key Growth Areas - The report highlights key growth areas such as SVIP service upgrades, fan economy potential, and the development of offline concerts [1]

Investment Rating - The report maintains a "Buy" rating for NetEase Cloud Music [3][8]. Core Insights - The report emphasizes the company's competitive advantages and growth potential, particularly focusing on its young user base and the resilience of the online music industry [7][8]. - The company has improved its liquidity and profitability significantly, with a return to profitability in 2023 and continued improvement expected in 2024 and 2025 [7][26]. Summary by Sections 1. Review: Return to Core Product and Improvement in Liquidity and Profitability - The company has refocused on its music core by simplifying its app and enhancing music recommendations and community experiences [19][22]. - Major copyright returns have strengthened the content offering, covering top artists across various genres [22][24]. - Liquidity has improved, with the proportion of mid-to-long tail equity increasing from 22.8% at the end of 2022 to over 31% currently [24][25]. - The company achieved a gross margin exceeding 36% in the first half of 2025, indicating a strong recovery [7][26]. 2. Industry: Strong Anti-Cyclicality and Favorable Market Structure - The online music market in China is projected to reach 28.8 billion RMB in 2024, growing at 20% year-on-year, with a CAGR of 32% from 2017 to 2024 [35][36]. - Young users are the primary growth driver, with nearly 70% of new users being from the post-2000 generation [37][38]. - The competitive landscape is stable, with Tencent Music and NetEase Cloud Music as the dominant players [40][41]. 3. Growth Drivers: Focus on Young Users with High Certainty and Potential - The user structure influences the company's differentiated copyright strategy, targeting a high proportion of young users [54][62]. - The company aims to increase its paid user base significantly, with projections suggesting a potential membership of over 88 million if the payment wall is raised [9][62]. - The community engagement is high, with average daily usage time nearing 80 minutes, indicating strong user loyalty [69]. 4. Profitability Forecast and Valuation - Revenue projections for 2025-2027 are 7.9 billion, 8.8 billion, and 9.8 billion RMB, respectively, with adjusted net profits of 2.86 billion, 2.33 billion, and 2.74 billion RMB [6][8]. - The report estimates a target market capitalization of 76.5 billion HKD for 2026, based on comparative company valuations [8][9].

Core Insights - Multiple users of music apps such as QQ Music, NetEase Cloud, and Kugou have reported issues with automatic renewal mechanisms, leading to unexpected charges ranging from a few yuan to hundreds of yuan for monthly and annual memberships [2][4] Complaint Data - From 2022 to 2025 (as of September 16), a total of 13,540 complaints related to online music apps were received by the Consumer Protection platform, with a resolution rate of 12.49%. Major platforms like QQ Music, Kugou Music, and NetEase Cloud accounted for 10,717 complaints, nearly 80% of the total, involving amounts exceeding 7.8 million yuan [4] Specific Cases - A case from August 17 involved a user in Nanjing who activated an automatic renewal feature for QQ Music's premium service, which was not clearly communicated at the time of sign-up. The user only discovered the automatic charge after one month [4] - Another case involved a user from Jiaxing who opened a NetEase Cloud membership in February 2024 and was charged monthly without any notification until November, raising concerns about consumer rights violations [4] Complaint Trends - Complaint volumes for QQ Music, Kugou Music, and other platforms have increased in 2025 compared to 2024, with the highest growth rates seen in Quanmin K Ge and QQ Music, at 335.54% and 208.49% respectively [5] Recommendations - Consumers are advised to pay attention to automatic renewal terms, regularly check their bills, and promptly address any issues. Platforms should not view automatic renewals as a shortcut to increase revenue but should simplify cancellation processes and provide proactive notifications to build user trust for long-term success [7]

Core Viewpoint - Tencent Music Entertainment Group (TME) reported solid growth in its Q2 financial performance, with total revenue increasing by 17.9% year-on-year to 8.44 billion yuan and adjusted net profit rising by 33.0% to 2.64 billion yuan [1] Financial Performance - Total revenue for Q2 reached 8.44 billion yuan, a 17.9% increase year-on-year [1] - Adjusted net profit grew by 33.0% to 2.64 billion yuan [1] - Online music service revenue increased by 26.4% to 6.85 billion yuan [1] - Online music subscription revenue reached 4.38 billion yuan, up 17.1% year-on-year [1] - The number of online music paying users rose to 124.4 million, with ARPPU increasing to 11.7 yuan [1] Industry Context - The growth of TME is supported by the booming digital music industry in China, with expanding online music user base and paid user numbers [4] - TME's online music business is the core engine driving overall performance, leveraging quality content and comprehensive services to tap into consumer potential [4] Content Ecosystem Development - TME is expanding its content ecosystem through diverse collaborations with artists and record companies, including partnerships with Wang Feng and G Nation [5] - The company is enhancing its content co-creation capabilities, collaborating with SM Entertainment and other studios for original content [5] Live Events and Artist Services - TME successfully organized its first international large-scale concert featuring G-DRAGON, attracting over 36,000 attendees [6] - The platform provided opportunities for nearly 100 emerging artists to perform over 300 live shows in the first half of the year [6] User Experience and Platform Services - TME upgraded user experience with features like HiFi sound quality and AI chorus functionality [9] - The company has established deep collaborations with automotive brands to extend music experiences into car environments [9] Strategic Outlook - TME aims to deepen partnerships within the industry and explore new possibilities in the music sector while enhancing user experiences and supporting artist growth [13]

Core Points - NetEase Cloud Music has officially stated that it does not have a "visitor record" feature, ensuring that user interactions such as visiting user or artist profiles do not generate any visitor records [2][5] - The platform emphasizes its commitment to user privacy and security, adhering to principles of "user awareness, user consent, and minimum necessity" in its privacy protection policies [5] - Previous user inquiries about a potential visitor record feature have been noted, with the company indicating that any related functionalities are still under evaluation and not currently available [5]

Core Viewpoint - Daiwa's report indicates that NetEase Cloud Music (09899) is expected to outperform in the first half of 2025, driven by a one-time tax benefit and improved operating profit margins [1] Financial Performance - The company's gross margin for online music services is anticipated to exceed expectations, alongside lower-than-expected marketing expenses [1] - Daiwa has raised its net profit forecasts for the next two years by 117% and 42% respectively [1] Rating and Target Price - Daiwa maintains a "Outperform" rating for NetEase Cloud Music, increasing the target price from 105 HKD to 310 HKD [1] - The new target price corresponds to a 27 times earnings forecast for 2026 [1]

Core Viewpoint - Daiwa's report indicates that NetEase Cloud Music (09899) exceeded profit expectations for the first half of 2025, primarily driven by a one-time tax benefit and improved operating profit margins [1] Group 1: Financial Performance - The company is expected to see a growth in gross margin for online music services, surpassing previous expectations [1] - Daiwa has raised its net profit forecasts for the next two years by 117% and 42% respectively [1] Group 2: Ratings and Price Target - Daiwa maintains a "Outperform" rating for NetEase Cloud Music [1] - The target price has been increased from HKD 105 to HKD 310, which corresponds to a 27 times earnings forecast for 2026 [1]

Core Viewpoint - NetEase Cloud Music's profitability exceeded expectations in the first half of the year, primarily due to a one-time tax benefit and an increase in operating profit margin [2] Revenue Forecast - Daiwa has lowered NetEase Cloud Music's revenue forecasts for the next two years by 11% and 10.9% respectively, due to the company's reduced investment in non-strategic live streaming business [2] Profit Forecast - Despite the revenue forecast adjustments, Daiwa has raised the net profit predictions for the next two years by 117% and 42% respectively, driven by anticipated growth in online music service gross margins and lower-than-expected marketing expenses [2] Rating and Target Price - Daiwa reiterated its "Outperform" rating for NetEase Cloud Music and raised the target price from HKD 105 to HKD 310 [2]

Core Viewpoint - Daiwa's report indicates that NetEase Cloud Music's profitability in the first half of the year exceeded expectations, primarily driven by a one-time tax benefit and improved operating profit margins [1] Revenue Forecast - The company has reduced its revenue forecasts for NetEase Cloud Music by 11% and 10.9% for the next two years due to a decreased focus on non-strategic live streaming business [1] Profitability Outlook - Despite the revenue forecast reduction, Daiwa has raised its net profit predictions for the next two years by 117% and 42%, citing anticipated growth in gross margins for online music services and lower-than-expected marketing expenses [1] Rating and Target Price - Daiwa maintains a "Outperform" rating for NetEase Cloud Music, increasing the target price from HKD 105 to HKD 310, which corresponds to a 27 times earnings forecast for 2026 [1]

Core Viewpoint - Tencent Music's stock price has surged over 120% this year, driven by strong Q2 earnings, making it one of the best-performing Chinese stocks [1][4]. Group 1: Stock Performance - As of August 22, Tencent Music's stock has increased by 126.16% year-to-date [4]. - The stock has been significantly supported by institutional investments, with 12 institutions including Tencent Music in their top ten holdings as of the end of Q2 [6]. Group 2: Institutional Investment - Keystone Investors, a Singapore-based hedge fund, increased its holdings in Tencent Music to 3.5256 million shares, making it the fund's largest position with a portfolio weight of 14.18% [5][6]. - A total of 319 institutions held Tencent Music shares by the end of Q2, up from 300 in the previous quarter [6]. Group 3: Analyst Upgrades - Major financial institutions have raised their target prices for Tencent Music following its earnings report, with Daiwa upgrading its rating from "Hold" to "Outperform" and increasing the target price from HKD 66 to HKD 106 [6]. - Barclays raised its target price for Tencent Music from USD 16 to USD 27, reflecting a 69% increase, while Citigroup and Lyon Securities also adjusted their target prices upward [6].