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1Q24 beat on strong music business growth and GPM expansion

原文出处: 招银国际   贡献者:研报专业户
腾讯音乐(TME)\r

TME reported1Q24results:total revenue declined by3%YoY to RMB6.77bn,beating consensus estimate by3%on strong online music revenue growth;non-IFRSnet income grew by21%YoY to RMB1.70bn,7%ahead of consensus estimate,primarily attributable to the solid GPM expansion(+7.9ppt YoY)and effective controlin opex(-8%YoY).TME further enhanced shareholder return on its strong cashgeneration capability and announced its first annual cash dividend of US$0.137perADS(c.1.0%dividend yield).Looking ahead,we forecast total revenue to decline by2%YoY,while non-IFRS net income to grow by20%in2Q24E on solid musicrevenue growth and GPM expansion.We raise FY24-26non-IFRS net incomeforecast by10-15%to factor in the stronger-than-expected GPM expansion trend.We raise our DCF-derived TP to US$16.00(previous:US$12.50).Maintain BUY.\r

1Q24subscriber growth ahead of expectation.Online music revenue was upby43%YoY to RMB5.01bn in1Q24(74%of total revenue),driven by stronggrowth of both music subscription and advertising businesses.Musicsubscription revenue grew by39%YoY to RMB3.6bn in1Q24,with paying usersup by20%YoY to113.5mn(6.8mn QoQ net adds).Monthly ARPPU was up16%YoY but down slightly QoQ due to the promotion campaigns during Chinese NewYear.Other music revenue increased by54%YoY to RMB1.4bn in1Q24,as themore diversified and innovative ad formats drove strong ad revenue growth.Social entertainment and others revenue dropped by50%YoY to RMB1.76bn in1Q24(26%of total revenue),due to adjustment of certain interactive functionsand intensified competition.\r

Online music revenue growth momentum to continue in2Q24E.Looking into2Q24E,we expect total revenue to decline by2%YoY to RMB7.16bn,as solidgrowth of online music revenue(+28%YoY)will be offset by decline in socialentertainment revenue(-43%YoY).Music subscriber net add is expected tonormalize in2Q24E after the peak in1Q24,as per management.On the productinnovation front,TME introduced large audio models and a new AI Assistant in1Q24,further improving the music promotion accuracy and user engagement.\r

Enhancing shareholder return on solid profitability.GPM rose by7.9ppt YoYand2.6ppt QoQ to40.9%in1Q24,underpinned by1)strong growth of musicsubscription and ad business;2)the ramp-up of self-produced content;and3)optimization of revenue-sharing ratio of live streaming business.Non-IFRS netmargin was up by5.0ppt YoY to25.2%in1Q24.For2Q24E,we expect GPM toexpand by8.1ppt YoY and1.5ppt QoQ to42.4%.The company continues toenhance shareholder return:1)announced annual dividend of US$0.137perADS(total amount US$210mn;c.1.0%of market cap);2)repurchased6.9mnADS for a total consideration of US$61mn in1Q24.\r

Source:Company data,Bloomberg,CMBIGM estimates\r

MORE REPORTS FROM BLOOMBERG:RESP CMBROR http://www.cmbi.com.hk\r

Business forecasts\r

DCF valuation\r

Our target price of US$16.00isand terminal growth of2.5%).
15.17 +2.50% +0.37

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