Major Bank Ratings | Haitong International: Lowers Tencent Music target price to $17, maintains "Outperform" rating

格隆汇 March 20｜Haitong International released a research report stating that Tencent Music's total revenue in the fourth quarter last year exceeded expectations by 3%, rising 16% year-on-year to 8.6 billions yuan; among this, music subscription revenue was 2% below expectations, increasing 13% year-on-year to 4.6 billions yuan, while advertising and other revenue exceeded expectations by 11%, rising 41% year-on-year to 2.5 billions yuan. Quarterly adjusted net profit met expectations, rising 9% year-on-year to 2.5 billions yuan, with a net profit margin of 28.8%, slightly lower than expectations by 0.6 percentage points. The bank expects first quarter average revenue per user (ARPU) to be 11.8 yuan, with first quarter and full-year music subscription revenues at 4.5 billions yuan and 18.7 billions yuan respectively, each up 6% year-on-year. Given Tencent Music's long-term copyright cooperation with top singers and music brands, the company enjoys a competitive advantage in these new non-subscription business areas. The bank has lowered its target price from $24 to $17, maintaining an "outperform" rating.