> **来源：[研报客](https://pc.yanbaoke.cn)** # TME (TME US) 1Q26 Results and Analysis Summary ## Core Content Overview TME (TME US) released its 1Q26 financial results, which showed total revenue of RMB7.90bn, an increase of 7% YoY, and non-IFRS net income of RMB2.27bn, also up 7% YoY. Both figures matched Bloomberg consensus estimates. The report highlights the ongoing competitive pressures and the impact of emerging copyright issues related to AI on the company's performance. Despite these challenges, TME's music-related business continued to show resilience, with service revenue growing by 12% YoY to RMB6.51bn. ## Key Business Insights - **Music-related Business Growth**: - Membership services revenue increased by 7% YoY to RMB4.57bn (58% of total revenue), driven by the expansion of the SVIP program and the launch of new membership products like bubble, WeverseDM, and fan-club memberships. - Non-membership music services revenue grew by 28% YoY to RMB1.94bn, primarily due to the strong growth in offline performance revenue and advertising. - **Social Entertainment Revenue**: - Social entertainment and other services revenue declined by 11% YoY to RMB1.38bn, attributed to intense competition leading to user churn. - **Acquisition of Ximalaya**: - The acquisition received regulatory approval with five restrictive conditions, including not increasing prices or reducing service quality for online audio services. - Expected to close in 2H26, this acquisition will enhance TME's audio product offerings and improve user experience. ## Financial Performance and Forecasts ### Earnings Summary | Metric | FY24A | FY25A | FY26E | FY27E | FY28E | |---------------------------|----------|----------|----------|----------|----------| | Revenue (RMB mn) | 28,401 | 32,902 | 35,763 | 38,602 | 40,735 | | Gross margin (%) | 42.3 | 44.2 | 43.9 | 44.4 | 44.7 | | Adjusted net profit (RMB mn)| 7,671.0 | 9,588.0 | 10,332.9 | 11,240.2 | 12,072.3 | ### Revenue Growth | Period | YoY Growth (%) | |---------------|----------------| | FY24A | 29.5 | | FY25A | 25.0 | | FY26E | 7.8 | | FY27E | 8.8 | | FY28E | 7.4 | ### Adjusted Net Profit Margin | Period | Margin (%) | |---------------|----------------| | FY24A | 27.0 | | FY25A | 29.1 | | FY26E | 28.9 | | FY27E | 29.1 | | FY28E | 29.6 | ## Valuation and Investment Outlook - **Target Price**: US\$17.5 (down from US\$20.0), based on DCF valuation with unchanged WACC of 9.6% and terminal growth of 3.0%. - **Current Valuation**: 10x FY26E non-IFRS PE, considered attractive given steady earnings growth, decent shareholder returns, and an enhanced content ecosystem. - **Recommendation**: Maintain BUY. ## Shareholding and Market Data - **Shareholding Structure**: - Tencent: 53.0% - Spotify: 9.1% - **Stock Data**: - Market Cap: US\$13,973.9mn - 3-Month Trading Volume: US\$45.2mn - 52-Week High/Low: US\$26.36 / US\$8.99 - Total Issued Shares: 1,540.7mn ## Share Performance | Period | Absolute Return (%) | Relative Return (%) | |--------------|---------------------|--------------------| | 1-Month | -3.8 | -14.5 | | 3-Month | -42.8 | -50.5 | | 6-Month | -51.4 | -57.4 | ## Business Forecasts Update | Metric | Current (RMB mn) | Previous (RMB mn) | Change (%) | |--------------------|------------------|-------------------|------------| | Revenue (FY26E) | 35,763 | 36,082 | -0.9% | | Gross Profit (FY26E)| 15,704 | 15,873 | -1.1% | | Non-IFRS Net Profit (FY26E) | 10,333 | 10,311 | 0.2% | | Non-IFRS EPS (RMB) | 6.6 | 6.6 | 0.1% | | Gross Margin | 43.9% | 44.0% | -0.1 ppt | | Non-IFRS Net Margin| 28.9% | 28.6% | +0.3 ppt | ## Valuation Highlights - **DCF Valuation**: - Free cash flow (RMB mn): FY26E - 10,424, FY27E - 11,272, FY28E - 11,924 - NPV of free cash flow: RMB60,058mn - Discounted terminal value: RMB98,446mn - Net cash: RMB24,425mn - Total TME valuation: RMB182,929mn - Valuation per ADS: US\$17.5 - **P/E Ratio**: - FY24A: 13.4 - FY25A: 8.3 - FY26E: 9.8 - FY27E: 9.2 - FY28E: 8.6 ## Analyst and Ratings Information - **Analysts**: - Saiyi HE, CFA: (852) 3916 1739 | hesaiyi@cmbi.com.hk - Wentao LU, CFA: luwentao@cmbi.com.hk - Ye TAO, CFA: (852) 3850 5226 | franktao@cmbi.com.hk - Shuyin GUO: (852) 3916 3716 | guoshuyin@cmbi.com.hk - **CMBIGM Ratings**: - **BUY**: Stock with potential return of over 15% over next 12 months - **HOLD**: Stock with potential return of +15% to -10% over next 12 months - **SELL**: Stock with potential loss of over 10% over next 12 months - **NOT RATED**: Stock is not rated by CMBIGM - **OUTPERFORM**: Industry expected to outperform the relevant broad market benchmark - **MARKET-PERFORM**: Industry expected to perform in-line with the relevant broad market benchmark - **UNDERPERFORM**: Industry expected to underperform the relevant broad market benchmark ## Important Disclosures - CMBIGM does not provide individually tailored investment advice. - The information in this report is for informational purposes only and not an offer to buy or sell any securities. - Past performance does not guarantee future results. - The report is not intended for distribution to the general public and is subject to legal restrictions in the United Kingdom, United States, and Singapore.