20240814-招银国际-Inline_2Q24_results__focus_on_balanced_growth_of_music_subs_and_ARPPU_in_2H24E_6页_1mb

报告摘要

TME (Tencent Music Entertainment) Equity Research Summary

Analyst: CMB International Global Markets
Date: August 14, 2024
Recommendation: BUY
Target Price (TP): US$16.00 (+21.9% YoY)
Summary:

This report provides an analysis of Tencent Music Entertainment (TME), focusing on its 2Q24 financial results and future expectations.

Key Highlights and Financial Performance

2Q24 Results: TME reported total revenue of RMB 7.16 billion, missing Bloomberg consensus estimates by a slight margin but aligning with TME's own projections. Non-IFRS net income increased 22% YoY to RMB 1.87 billion, exceeding expectations.
Online Music Growth: The online music segment remains the primary revenue driver, contributing 76% of total revenue. Revenue grew 28% YoY to RMB 5.42 billion fueled by subscription growth (net adds increased 18% YoY to 117 million paying users) and increasing ARPPU (monthly ARPPU grew 10% YoY to RMB 10.7). High-value Super VIP revenue performance drove this success.
Gross Margin (GPM): Increased significantly, finishing 2Q24 at 42.0%, up 7.7 pp YoY and 1.1 pp QoQ, driven by music segment margin improvement.

3Q24E Outlook

Revenue Expectations: Analyst maintains a BUY recommendation. Projects 3Q24E revenue growth of +8% YoY, supported mainly by online music's strong 24% YoY growth but partially offset by the continuing decline in social entertainment's performance.
Music Strategy: While music subscriber net additions are expected to slow to 1.5-2.0 million per quarter in 2Q24E, ARPPU growth is forecasted to continue on the back of AI-enhanced content recommendation tools (now driving ~40% of streams) and the Super VIP program.

Financial Analysis & Valuation

TME's valuation of 21x FY24E PE is considered fair.
The DCF valuation methodology yields a TP of US$16.00 per ADS, factoring a WACC of 11.6% and terminal growth rate of 2.5%.