20230816-招银国际-Improving_profitability_despite_pressure_on_social_entertainment_business_6页_1mb

报告摘要

TME Financial Analysis: Q2 2023 Results and Outlook

Executive Summary

CMB International Global Markets published an update on Tencent Music Entertainment (TME US) for the second quarter of 2023, highlighting improving profitability amid pressures in the social entertainment sector. The report analyzes financial performance, business segments, and revised forecasts for the fiscal year.

Financial Highlights (Q2 2023)

Revenue: Total revenue increased 5.5% year-over-year to RMB7.3 billion, slightly exceeding or matching consensus estimates. Non-IFRS net income jumped 48.6% YoY to RMB1.5 billion, aligning with expectations.
Segments:
- Online music revenue contributed 58% of total revenue, growing 48% YoY driven by strong music subscription growth and ad recovery.
- Social entertainment revenue declined 12% below consensus YoY due to proactive risk control measures.
Profitability: Gross profit margin expanded to 34.3%, and non-IFRS net margin rose to 21.0%, supported by margin improvements in the online music segment.

Business Updates

Online Music: Beating expectations with RMB4.2 billion revenue in Q2, fueled by 37% YoY growth in subscription revenue (RMB2.9 billion) and 76% YoY growth in ad-supported revenue. Management expects 30% YoY growth for the year.
Social Entertainment: Faces ongoing pressure with a 25% YoY revenue drop, attributed to risk control measures. Expected to decline further in the third quarter, with stabilization anticipated in the fourth quarter.
Overall Performance: Maintains resilient earnings growth with a BUY recommendation based on attractive valuation metrics.

Valuation and Outlook

Target Price: Revised down to US$9.20 from US$10.00, based on DCF model adjustments for lower revenue and profitability forecasts.
Recommendation: Maintain BUY rating, with FY23 earnings growth forecasted at +24% YoY and 12x PE ratio for 2023.
Guidance: FY23 revenue expected to decrease by low-to-mid single digits YoY, with FY23-25 revenue forecast lowered by 5-6%. Valuation sensitivity lies in online music's growth and profitability.

This summary covers key points from the analyst report; detailed financial data and forward estimates are included in the full document.

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