Core Viewpoint - Tencent Music (NYSE: TME) continues to show a trend of fundamental divergence, with strong growth in online music services offset by weakness in social entertainment, leading to a cautious outlook on the stock [1] Group 1: Financial Performance - Music subscription revenue increased by 18% year-on-year to RMB 4.03 billion, driven by a 13% growth in paid user numbers and gradual ARPU improvement [2] - Social entertainment revenue declined by 13% year-on-year to RMB 1.6 billion due to adjustments in live interaction features and stricter compliance procedures [2] - Projected revenue for 2026 is expected to reach RMB 29.33 billion, with a target multiple of 5.0x, resulting in an implied value of approximately USD 13 per share, reflecting a 10% downside from current levels [5][6] Group 2: User Engagement and Content Strategy - Tencent Music is enhancing platform stickiness to support future ARPU growth, expanding its content library through partnerships with SM Entertainment and Kakao Entertainment [3] - The company is investing in application optimization and AI-driven recommendations, resulting in a 10% increase in user playlists and improved sound quality [3] - SVIP membership numbers are steadily increasing, with enhanced features like high-definition online concerts and an expanded digital library attracting more users [3][4] Group 3: Market Outlook and Valuation - Given the structural decline in social entertainment, Tencent Music's valuation should be based solely on its music subscription and advertising business [4] - Future growth expectations include an 11% CAGR in paid users and a 5% CAGR in ARPU over the next two years, with advertising revenue expected to grow at a 15% CAGR [4][6] - The company is also exploring partnerships for in-car music services, which could drive user growth as the automotive market shifts towards high-tech electric vehicles [4]