Tencent Music (1698)

[winston]

vested

<Research> CICC Cuts TME-SW (01698.HK) TP to HKD55.5; 1Q Profit In Line

CICC issued a report stating that TME-SW (01698.HK) recorded 1Q revenue of RMB7.895 billion, up 7% YoY.

Non-IFRS net profit rose 7% YoY to RMB2.273 billion, broadly in line with the broker's forecast of RMB2.229 billion and market consensus of RMB2.244 billion.

Gross margin for the quarter increased 0.2 ppts QoQ to 44.9%, mainly driven by higher revenue from music-related membership services and lower channel costs.

The report noted that the State Administration for Market Regulation approved Tencents acquisition of a stake in Ximalaya on May 12, subject to restrictive conditions, including prohibitions on raising service prices, reducing the proportion of free content, implementing exclusive licensing, and bundling sales.

Considering that Ximalaya may be consolidated in 2H26 and that expenses could rise, CICC lowered its 2026 Non-IFRS net profit forecast for TME-SW by 1.6% to RMB10.2 billion, and expects online music revenue to grow 8.3% YoY in 2Q.

Related News: BOCI Downgrades TME-SW (01698.HK) to Hold, TP Cut to HKD39

CICC maintained its Outperform rating on TME-SW, but due to market concerns over the competitive landscape, cut its TP for the Hong Kong-listed H shares by 17.8% to HKD55.5.

The TP for Tencent Music Entertainment Group (TME.US) was lowered to USD14.3.

Source: AASTOCKS Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN