According to Orient Securities Research Report, Tencent Music (01698) had revenue of 7.29 billion yuan in 23Q2, up 5.6% year on year and 4.1% month on month. 23Q2's gross profit margin was 34.3%, up 5.34 pp year on year and 1.2 pp month on month. The bank expects annual gross margin to rise above 35%. Mainly due to continued growth in member revenue and dilution of copyright costs. Q2 sales expenses were 211 million yuan (yoy -30.4%, qoq -0%). The main reason is that the company has optimized its overall promotion strategy and reduced the cost of user acquisition costs.
Group Q2MAU 590 million (yoy +0.2%, qoq +0.3%); MPU 100 million (yoy +20.2%, qoq +5.3%); ARPPU 9.7 yuan/month (yoy +0.1%, qoq +5.7%). User payment habits have developed significantly. The bank expects payment rates and ARPPU to continue to grow quarterly. The current payment rate has room to improve regardless of whether it is a video platform or an overseas music platform, Spotify.
According to the bank, users continue to develop music payment habits, and the company's music payment rate and ARPPU continue to rise sharply. In addition, the company has reduced costs and increased efficiency, and profits have steadily increased. The bank expects the company's net profit for 23-25 to be 57/68/7.7 billion yuan respectively (the original forecast value for 23-25 was 43/49/5.6 billion yuan, as the rate of increase in music payment rates and ARPPU exceeded expectations), corresponding to earnings of 1.67/1.98/2.24 yuan per share. Using SOTP valuation, a target price of 45.31 HKD (41.68 RMB) was given, maintaining the “buy” rating.