Core Viewpoint - The company reported strong Q2 2025 performance, exceeding expectations with significant revenue and profit growth, driven primarily by online music services and a diversified product offering [1][2] Financial Performance - In H1 2025, the company achieved revenue of 15.798 billion, a year-on-year increase of 13.43%, and a net profit of 6.7 billion, up 115.85% [1] - Q2 2025 revenue reached 8.442 billion, reflecting a year-on-year growth of 17.91%, while net profit was 2.409 billion, an increase of 43.22% [1] - Online music service revenue was 6.85 billion, growing 26.4% year-on-year, while social entertainment revenue declined by 8.5% to 1.59 billion [1] Revenue Drivers - The growth in online music services was attributed to a rapid increase in subscription revenue and steady growth in advertising services, artist merchandise, and live performances [1] - Subscription revenue for online music reached 4.38 billion, up 17.1%, driven by an increase in average revenue per paying user, which was 11.7, a 9.3% year-on-year increase [1] Margin Improvement - The gross margin for Q2 2025 was 44.4%, an increase of 2.4 percentage points, primarily due to the rapid growth in subscription and advertising revenue, optimizing the revenue structure [1] Future Outlook - The company plans to enhance its content ecosystem, provide customized support for domestic and international artists, and innovate product offerings to sustain long-term growth [2] - Short-term strategies include promoting internationalization of the Bubble community and enhancing the fan economy ecosystem [2] - Mid-term focus will be on deepening SVIP benefits and increasing investment in AI technology and expanding overseas markets [2] - Long-term goals involve building a comprehensive music entertainment ecosystem encompassing content, platform, social interaction, and performances to increase global market share [2] Investment Recommendation - The company maintains a solid industry position with robust growth, with projected EPS for 2025-2027 at 3.48, 3.29, and 3.72, respectively, and current stock price corresponding to PE ratios of 27X, 28X, and 25X [2]

Macro Economic Group - The July PPI in the US increased by 3.3% year-on-year, the highest since February, with a month-on-month increase of 0.9%, the highest since June 2022 [4] - Core PPI rose by 3.7% year-on-year, exceeding expectations, with a month-on-month increase of 0.9% [4] - The unexpected strength in PPI data may lead to a market reassessment of inflation and interest rates, with a 93% probability of a 25 basis point rate cut expected in September [4][5] Industry Comprehensive Group - Taicheng Technology reported a revenue of 828 million yuan in the first half of 2025, a year-on-year increase of 62.49%, and a net profit of 173 million yuan, up 118.02% [7] - The increase in performance is attributed to self-developed key components replacing external purchases and changes in sales structure, leading to a rise in gross margin [7] - The AI server revenue of Hon Hai Precision Industry reached 1.79 trillion NTD in Q2, a year-on-year increase of over 60%, with expectations for continued growth in the AI market [7] Advanced Manufacturing Group - The energy storage industry is experiencing a surge in demand, with many companies reporting improved performance due to accelerated project implementation and positive market signals [9] - 152 energy storage companies are advocating against internal competition, indicating a shift towards high-quality development in the industry [9] - The sales of new energy heavy trucks reached 16,200 units in July, a year-on-year increase of 185%, with a cumulative sales of 82,200 units from January to July, reflecting strong market confidence [10][11] Consumer Group - Jinlongyu reported a revenue of 115.68 billion yuan in the first half of 2025, a year-on-year increase of 5.67%, with a net profit of 1.756 billion yuan, up 60.07% [15] - Tencent Music achieved a revenue of 15.798 billion yuan in the first half of 2025, a year-on-year increase of 13.43%, with a net profit of 6.7 billion yuan, up 115.85% [16]

Investment Rating - The report maintains a "Buy" rating for Tencent Music [5] Core Views - The growth of online music paid users and ARPPU is expected to drive an increase in online music revenue, leading to improved profit margins. The forecasted net profit for 2025-2027 is adjusted to 11.6 billion, 11.1 billion, and 12.8 billion yuan respectively, up from previous estimates due to higher music membership payment rates and adjustments in social entertainment revenue [2] - The target price is set at 112.8 HKD (102.6 RMB) based on a P/E ratio of 29 times for 2026 [2] Financial Performance Summary - For 2023A, the total revenue is projected at 27.75 billion yuan, with a year-on-year decline of 2.1%. Revenue is expected to grow to 32.62 billion yuan in 2025E, reflecting a 14.8% increase [3][11] - The operating profit for 2023A is 4.78 billion yuan, with a significant year-on-year growth of 48.5%. It is expected to reach 9.83 billion yuan by 2025E, a 33.7% increase [3][11] - The net profit attributable to the parent company for 2023A is 4.92 billion yuan, with a year-on-year growth of 33.8%. The forecast for 2025E is 11.55 billion yuan, representing a 73.9% increase [3][11] - The gross margin is expected to improve from 35.3% in 2023A to 44.4% in 2025E, while the net margin is projected to rise from 17.7% to 35.4% over the same period [3][11] - The report anticipates a rise in online music revenue to 68.5 billion yuan in Q2 2025, a year-on-year increase of 26.4% [8] - The average revenue per paying user (ARPPU) is expected to increase to 11.9 yuan per month in Q3 2025, up from 11.7 yuan in Q2 2025 [8]

Investment Rating - The report maintains a "Buy" rating for Tencent Music (TME.N) [4][6]. Core Insights - Tencent Music's total revenue for Q2 2025 reached 8.44 billion RMB, a year-over-year increase of 17.9%, exceeding Bloomberg's consensus estimate of 7.99 billion RMB, primarily driven by unexpected growth in non-subscription revenue [2]. - The adjusted net profit attributable to shareholders for Q2 2025 was 2.57 billion RMB, reflecting a year-over-year increase of 37.4%, surpassing the expected 2.27 billion RMB [2]. - The online music revenue accounted for 6.85 billion RMB, up 26.4% year-over-year, representing 81% of total revenue, while social entertainment services and other revenues declined by 8.5% due to adjustments in live streaming features and stricter compliance measures [2][3]. Revenue Structure Summary - Subscription revenue reached 4.38 billion RMB, growing 17.1% year-over-year, with a music MAU of 553 million, a decrease of 3.2% year-over-year, and a total of 12.4 million paying subscribers, an increase of 6.3% year-over-year [3]. - Non-subscription revenue was 2.47 billion RMB, showing a significant growth of approximately 47%, highlighting the company's strong artist resource integration capabilities [3]. - Advertising revenue grew by 36% year-over-year, driven by increased ad placements and enhanced user engagement, particularly during the 618 shopping festival [3]. Expense and Profitability Summary - Total expenses for Q2 2025 were 1.15 billion RMB, remaining relatively stable, with marketing expenses increasing by 3% to 216 million RMB [4]. - The report anticipates a slight decline in gross margin in Q3 2025 due to the rising proportion of non-subscription business, but expects an overall improvement in gross margin for the year [4]. Profit Forecast and Valuation Summary - The adjusted net profit forecasts for 2025-2027 have been revised upward to 9.84 billion RMB, 11.51 billion RMB, and 12.98 billion RMB, reflecting increases of 5.2%, 5.5%, and 3.9% respectively from previous estimates [4]. - The projected revenue for 2025 is 32.70 billion RMB, with a growth rate of 15.1% [5].

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].

Investment Rating - The report assigns a "Buy" rating to Tencent Music (TME US) with a target price of $17.00, indicating a potential upside of 15.7% from the current price of $14.69 [1][15]. Core Insights - The report highlights a focus on high-quality membership growth and the release of operational and profit potential. It anticipates that the increase in Average Revenue Per Paying User (ARPPU) will have a greater impact than the growth in membership numbers. The report emphasizes the importance of member benefits, fan economy, and long audio content in driving SVIP growth [1][5]. - The adjusted net profit forecast for 2025 has been slightly increased by 3% to 8.9 billion RMB, with a maintained SOTP target price of $17.00 (66 HKD) [1][16]. Financial Forecasts - Revenue projections for 2025 are set at 31.177 billion RMB, reflecting a 1% increase from previous estimates. The online music segment is expected to generate 25.417 billion RMB, with subscription revenue anticipated to reach 17.729 billion RMB, a 1% increase [2][10]. - The adjusted net profit for 2025 is forecasted at 8.905 billion RMB, representing a 3% increase from prior estimates, with an adjusted net profit margin of 28.6% [2][10]. - The report projects a steady growth in ARPPU, expecting it to rise to 12.2 RMB by the end of 2025, driven by high-quality membership growth [5][10]. Performance Overview - In Q1 2025, Tencent Music reported revenues of 7.356 billion RMB, with online music revenue at 5.804 billion RMB, and a net profit of 4.388 billion RMB, which was 25% higher year-on-year [9][10]. - The number of paying music subscribers reached approximately 122.9 million, with a monthly ARPPU of 11.4 RMB, showing an 8% year-on-year increase [5][9]. Market Position - Tencent Music's market capitalization is approximately 20.062 billion USD, with a year-to-date stock price change of 29.43% [4][10]. - The report indicates that the company is well-positioned within the online music industry, with expectations for continued growth in subscription and advertising revenues [1][5].