20250813-招银国际-2Q25_results_beat_emerging_opportunities_beyond_subscription_6页_1mb

CMB International Global Markets Equity Research Company Update

TME (TME US) 2Q25 Results: Beat Expectations, Tapping New Growth Opportunities

Summary

CMB International Global Markets upgraded its research on TME (Ticketmaster Entertainment), raising its financial forecasts and target price to US$29.50 per ADS. The firm highlighted robust performance in TME's 2Q25 results, particularly in non-subscription music revenue streams, which are becoming a key growth driver.

Key Performance Highlights (2Q25):

• Strong Top-Line Growth: Total revenue increased by 18% year-over-year (YoY) to RMB 8.44 billion, exceeding the Bloomberg consensus by 6%. Non-IFRS net income grew by 37% YoY to RMB 2.57 billion, beating estimates by 13%.
• Record-Breaking Revenue Driver: Music Subscription revenue recorded its highest ever quarter. Non-Subscription music revenue experienced the sharpest growth (+47% YoY) driven by advertising, artist-related merchandise, and offline performances. This category also increased 47% YoY to RMB 2.47 billion. Notably, subscription revenue grew by 17% YoY.
• User Growth: Net active subscribers increased by 1.5 million sequentially to 124 million (up 6% YoY).
• ARPPU & Margin: Monthly Average Revenue Per Paid User increased by 10% YoY to RMB 11.7. Gross Profit Margin (GPM) rose significantly to 44.4% (+2.4ppts YoY), while Non-IFRS Net Margin hit 30.5% (+4.3ppts YoY). TME recently surpassed 15 million SVIP subscribers, likely contributing to ARPPU growth. Despite margin expansion driven primarily by subscriptions and ads, growth in higher-margin lower-margin businesses partially offset margin gains.

Earnings Forecast & Valuation Revision:

• Consensus Revisions Expected: Management expects 3Q25E total revenue to grow by 17% YoY, primarily driven by continued strong online music performance (+22% YoY). Specific segments show significant upside:
  • Online Music Segment: Forecast growth for music subscription (+17% YoY), other music (+35% YoY including ads and offline), underpinned by user base and ARPPU growth.
• Revised Financial Forecasts: Forecasts for FY2025-2027E have been upgraded by 6-10% across revenue, gross profit, and non-IFRS net profit.
• Valuation Upgrade: Target Price (TP) was hiked from US$17.50 to US$29.50, reflecting increased confidence in the outlook, particularly the growth potential from non-subscription opportunities. This is backed by a DCF model with a WACC of 9.6% and a terminal growth rate of 3.0%.

Opportunities & Outlook:

The core of the positive outlook rests on TME's ability to capitalize on emerging opportunities beyond traditional subscription music:

1. Advertising: Strong momentum gaining from strategic ad initiatives launched this quarter.
2. Artist-Related Merchandise: Significant revenue growth driven by successful large-scale concert initiatives.
3. Offline Performances: Revenue increase driven by live business.
4. Synergies: Potential for strategic collaborative synergies between subscription and non-subscription business models, including the ad-based membership pilot.

Presented as an opportunity report, analysts recommend 'BUY'. The subtitle or header in the original markdown suggests "Business forecasts update and valuation".

Disclaimer: Please review the Analyst Certification and Important Disclosures included in the full report.