TENCENT MUSIC ENTERTAINMENT GROUP

Recommendation history

• Q2 2022HoldHold: TME’s Q2 showed a meaningful shift toward healthier music monetization, with subscription revenue up 18% YoY to RMB2.11 billion, paying users up 25% to 82.7 million, and non-IFRS net margin at 15.4%. However, total revenue still fell 14% YoY to RMB6.9 billion, social entertainment revenue declined 20%, online music MAUs fell, and advertising remained weak; the call provided no numeric outlook to underwrite a stronger recovery.
• Q1 2022HoldHold: Q1 revenue fell 15% year over year to RMB6.6 billion and gross margin declined 350 basis points to 28%, while non-IFRS net profit rose sequentially 8% to RMB939 million. The bull case is increasingly healthy paid music monetization—80.2 million paying users, up 32%, with 4 million net adds—but declining MAUs, a 21% drop in social-entertainment revenue, advertising weakness and intense competition make this a recovery story rather than a clean buy.
• 2022-03-21HoldHold: Tencent Music’s online music engine is improving—Q4 subscription revenue rose 24% to RMB1.95 billion, paying users grew 36% to 76.2 million, and management expects the core music business to reach full-year operating break-even in 2022. However, the higher-quality growth is not yet offsetting deterioration elsewhere: total Q4 revenue fell 9% to RMB7.6 billion, social entertainment revenue dropped 15%, online music MAUs declined 1%, gross margin contracted 3.6 percentage points to 28.8%, and ARPPU fell to RMB8.5.
• Q3 2021HoldTME delivered a mixed quarter: total revenue rose only 3% year over year to RMB7.8 billion, while online music revenue grew 24% to RMB2.9 billion and subscription revenue rose 30% to RMB1.9 billion. However, social entertainment revenue fell 6% to RMB4.9 billion, gross margin declined 280 basis points to 29.6%, and ARPPU fell to RMB8.9 from RMB9.4; strong music monetization is not yet enough to offset the regulated and increasingly competitive legacy business. Stance: hold until social stabilization and new-product monetization are demonstrated.
• Q1 2021HoldHold: TME delivered strong Q1 execution, with revenue up 24% YoY to RMB7.8 billion, online music revenue up 35% to RMB2.7 billion, and a record 4.9 million net music-paying-user additions. However, the weaker-quality parts of the business remain exposed: social-entertainment paying users fell 12.4% YoY, mobile music MAUs declined, operating expenses rose faster than revenue, and the leadership transition and long-form-audio investments lack quantified returns.
• Q4 2020HoldHold: Tencent Music exited 2020 with strong online-music momentum—Q4 revenue rose 14.3% to RMB8.3 billion, online-music revenue grew 29%, subscriptions rose 42%, and paying users increased 40% to 56 million. However, social-entertainment paying users fell 14.3%, gross margin declined 170 bps year over year to 32.4%, and management offered no quantified 2021 outlook while investing heavily in long-form audio and content.
• Q3 2020HoldHOLD: Tencent Music delivered strong Q3 execution, with revenue up 16.4% to RMB7.6 billion, online music revenue up 26%, subscription revenue up 55%, and 51.7 million paying music users. However, the recovery remains uneven: social-entertainment paying users fell 14.6% year over year, gross margin declined 1.6 percentage points year over year to 32.4%, and management is still investing heavily in long-form audio, live concerts, and product upgrades amid competitive pressure for user time.