Core Viewpoint - Daiwa has upgraded Tencent Music's rating from "Hold" to "Outperform" due to strong execution in Super VIP (SVIP) and fan economy monetization, along with disciplined spending, leading to a revised 12-month target price of HKD 106 from HKD 66 based on a 25x P/E ratio, up from the previous 18x [1] Group 1: Revenue Growth Drivers - The introduction of a new incentive advertising membership price tier (RMB 10 per month, automatically renewing at RMB 5, with an initial discount of RMB 1) is expected to drive advertising revenue growth faster than subscription revenue, positively impacting Tencent Music's online music gross margin [1] - The potential acquisition of Ximalaya by Tencent Music may serve as a strategic complement to its music business and strengthen the SVIP product, leveraging Tencent's distribution network to reduce sales and marketing costs [1] Group 2: Financial Projections - Daiwa has raised its revenue forecasts for Tencent Music for 2025 to 2027 by 3% to 4% and adjusted earnings per share estimates upward by 2% to 7%, driven by better-than-expected online music revenue growth and operating profit margins [1] - For 2026 to 2027, Tencent Music's earnings growth is anticipated to be stronger than market consensus by 15% to 17% [1]

Core Viewpoint - Daiwa upgraded Tencent Music (01698) from "Hold" to "Outperform" due to strong execution in Super VIP (SVIP) and fan economy monetization, maintaining disciplined spending, and new projects driving revenue growth [1] Group 1: Financial Performance - Tencent Music's Q2 2025 performance reflects strong execution in SVIP and fan economy monetization [1] - Daiwa raised the 12-month target price from HKD 66 to HKD 106 based on a revised price-to-earnings ratio of 25 times, up from 18 times [1] - Revenue forecasts for 2025 to 2027 were increased by 3% to 4%, and earnings per share were raised by 2% to 7% due to better-than-expected online music revenue growth and operating profit margins [1] Group 2: Strategic Initiatives - The introduction of a new incentive advertising membership price tier (RMB 10 per month, auto-renewing at RMB 5, with a first-time discount of RMB 1) is expected to drive advertising revenue growth faster than subscription revenue [1] - The potential acquisition of Ximalaya by Tencent Music may strategically complement its music business and strengthen the SVIP product [1] - If approved by market regulators, the acquisition could contribute an estimated 5% to 10% incremental profit in 2026, which is not yet included in Daiwa's forecasts [1] Group 3: Market Outlook - Daiwa anticipates stronger profit growth for Tencent Music in 2026 to 2027, exceeding market consensus by 15% to 17% [1]

Core Viewpoint - Daiwa's report indicates that Tencent Music's Q2 performance reflects strong execution in monetizing Super VIP (SVIP) and fan economy, leading to an upgrade of the stock rating from "Hold" to "Outperform" due to new projects driving revenue growth [1] Group 1: Financial Performance - Tencent Music's Q2 results show a robust execution in SVIP and fan economy monetization while maintaining disciplined spending [1] - The 12-month target price has been raised from HKD 66 to HKD 106 based on a revised price-to-earnings ratio of 25 times, up from 18 times [1] Group 2: Revenue Growth Drivers - Concerns regarding Tencent Music's strategy to attract/retain price-sensitive users have been alleviated with the introduction of new incentive advertising membership pricing, which is expected to drive advertising revenue growth faster than subscription revenue [1] - The acquisition of Ximalaya may serve as a strategic complement to its music business and strengthen the SVIP product, with potential to leverage Tencent's distribution network to reduce sales and marketing costs [1] Group 3: Earnings Forecast Adjustments - Daiwa has raised revenue forecasts for 2025 to 2027 by 3% to 4% and adjusted earnings per share estimates upward by 2% to 7% due to better-than-expected online music revenue growth and operating profit margins [1] - The potential acquisition is estimated to contribute an incremental profit of 5% to 10% by 2026, pending regulatory approval, which is not yet included in Daiwa's forecasts [1]