20231115-招银国际-Inline_3Q23_results__strong_music_subscription_revenue_growth_6页_1mb

报告摘要

TME Analyst Report Summary

Key Overview

This report covers Tencent Music Entertainment (TME) for Q3 2023, issued by CMB International Global Markets on November 15, 2023. TME reported in-line Q3 2023 financial results, with total revenue declining by 11% year-over-year to RMB6.6 billion, mainly due to a soft social entertainment business. Despite this, non-IFRS net income increased by 2% to RMB1.41 billion, aligning with estimates. The company maintains a BUY rating with a revised target price of US$8.90.

Performance Highlights

Revenue Decline: Q3 revenue fell 11% YoY and 10% quarter-over-quarter to RMB6.6 billion, below consensus estimates but consistent with adjusted forecasts. Forecasted for a further 10% decline in Q4 2023.
Music Subscription Growth: This segment saw a strong performance, with revenue up 42% YoY to RMB3.2 billion, driven by higher average revenue per paying user and user base expansion. This balanced 17.3% of total revenue.
Gross Profit Margin: Improved to 35.7%, supporting better monetization efficiency. Management expects sequential margin expansion.

Challenges and Risks

Social Entertainment Revenue: This area contracted by 49% YoY to RMB2.0 billion due to business adjustments and higher compliance costs. Q4 is forecast further decline, but stabilization expected by FY2024.
Revenue Forecast Uncertainty: Lowered FY2023-2025 earnings estimates by 2-6%, reflecting ongoing uncertainties in social entertainment.

Valuation and Recommendations

The target price is lowered to US$8.90 from US$9.20. Buy recommendation remains based on DCF valuation, underpinned by music subscription growth potential.