Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Bottom-Up

<ul><li>Tencent Music Entertainment Group, a leading player in China's music streaming industry, started the year 2024 with some substantial financial and operational achievements, reflecting its continued emphasis on a dual-engine strategy of content richness and platform optimization.</li><li>However, not all indicators were uniformly positive, revealing certain challenges and strategic pivots.</li><li>On the upside, Tencent Music reported a marked increase in its subscriber base, adding a record 6.8 million net subscribers during the quarter, which pushes the total count to 113.5 million music-paying users.</li></ul>

Tencent Music Entertainment Group, a leading player in China's music streaming industry, started the year 2024 with some substantial financial and operational achievements, reflecting its continued emphasis on a dual-engine strategy of content richness and platform optimization.However, not all indicators were uniformly positive, revealing certain challenges and strategic pivots.On the upside, Tencent Music reported a marked increase in its subscriber base, adding a record 6.8 million net subscribers during the quarter, which pushes the total count to 113.5 million music-paying users.

Tencent Music Entertainment Group: How Are They Enhancing User Engagement through Artificial Intelligence? - Major Drivers

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>TME reported 1Q24 results: total revenue declined by 3% YoY to RMB6.77bn, beating consensus estimate by 3% on strong online music revenue growth; non-IFRS net income grew by 21% YoY to RMB1.70bn, 7% ahead of consensus estimate, primarily attributable to the solid GPM expansion (+7.9ppt YoY) and effective control in opex (-8% YoY).</li><li>TME further enhanced shareholder return on its strong cash generation capability and announced its first annual cash dividend of US$0.137 per ADS (c.1.0% dividend yield).</li><li>Looking ahead, we forecast total revenue to decline by 2% YoY, while non-IFRS net income to grow by 20% in 2Q24E on solid music revenue growth and GPM expansion.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

TME reported 1Q24 results: total revenue declined by 3% YoY to RMB6.77bn, beating consensus estimate by 3% on strong online music revenue growth; non-IFRS net income grew by 21% YoY to RMB1.70bn, 7% ahead of consensus estimate, primarily attributable to the solid GPM expansion (+7.9ppt YoY) and effective control in opex (-8% YoY).TME further enhanced shareholder return on its strong cash generation capability and announced its first annual cash dividend of US$0.137 per ADS (c.1.0% dividend yield).Looking ahead, we forecast total revenue to decline by 2% YoY, while non-IFRS net income to grow by 20% in 2Q24E on solid music revenue growth and GPM expansion.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

TME (TME US) - 1Q24 Beat on Strong Music Business Growth and GPM Expansion

<ul>
<li>Tencent Music Entertainment Group (TME) posted robust results in its fourth quarter and full year 2023 earnings call.</li>
<li>Increasing subscribers and expedited revenue growth were notable positives, taking the total number of subscribers to the 100 million milestone due to the company’s focus on content leadership, platform value, and offering a high-quality user experience.</li>
<li>Yet, the company also faced some headwinds, particularly in the social entertainment business.</li>
</ul>


Tencent Music Entertainment Group (TME) posted robust results in its fourth quarter and full year 2023 earnings call.
Increasing subscribers and expedited revenue growth were notable positives, taking the total number of subscribers to the 100 million milestone due to the company’s focus on content leadership, platform value, and offering a high-quality user experience.
Yet, the company also faced some headwinds, particularly in the social entertainment business.


Tencent Music Entertainment Group: Initiation Of Coverage - Core Business Strategy

<ul><li>TME announced its 4Q23 results on 19 Mar: total revenue decreased by 7% YoY to RMB6.9bn, 3% ahead of consensus/our estimate thanks to the robust core music revenue growth (+41% YoY); non-IFRS net income grew 10% YoY to RMB1.58bn, beating consensus/our estimate of RMB1.56/1.50bn.</li><li>For FY23, total revenue declined by 2% YoY, while non-IFRS net income was up 25% YoY on solid improvement in GPM and operating efficiency.</li><li>For FY24E, we expect total revenue will return to the growth track (+3% YoY), backed by the robust core music business. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

TME announced its 4Q23 results on 19 Mar: total revenue decreased by 7% YoY to RMB6.9bn, 3% ahead of consensus/our estimate thanks to the robust core music revenue growth (+41% YoY); non-IFRS net income grew 10% YoY to RMB1.58bn, beating consensus/our estimate of RMB1.56/1.50bn.For FY23, total revenue declined by 2% YoY, while non-IFRS net income was up 25% YoY on solid improvement in GPM and operating efficiency.For FY24E, we expect total revenue will return to the growth track (+3% YoY), backed by the robust core music business. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

TME (TME US) - Expect Solid Core Music Business and GPM Expansion in FY24

<ul><li>TME is making steady progress in online music paying user growth: we expect 4Q23 total revenue to decline by 10% YoY to RMB6.7bn, but non-IFRS net income to grow by 5% YoY to RMB1.5bn, mainly due to continuous improvement in online music GPM and the effective control on opex.</li><li>Despite macro uncertainty, we expect TME’s online music business to maintain solid growth in 4Q23 (+36% in 4Q23E based on our estimate), supported by the steady growth of both paid users and ARPPU.</li><li>In our view, TME’s current valuation of 16x FY24E Non-IFRS PE remains attractive given its resilience against macro uncertainty, unparalleled leadership in online music sector and solid earnings growth outlook (FY23-25E CAGR of 15%). </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

TME is making steady progress in online music paying user growth: we expect 4Q23 total revenue to decline by 10% YoY to RMB6.7bn, but non-IFRS net income to grow by 5% YoY to RMB1.5bn, mainly due to continuous improvement in online music GPM and the effective control on opex.Despite macro uncertainty, we expect TME’s online music business to maintain solid growth in 4Q23 (+36% in 4Q23E based on our estimate), supported by the steady growth of both paid users and ARPPU.In our view, TME’s current valuation of 16x FY24E Non-IFRS PE remains attractive given its resilience against macro uncertainty, unparalleled leadership in online music sector and solid earnings growth outlook (FY23-25E CAGR of 15%). Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

TME (TME US) - Online Music Business Maintains Solid Growth Amid Macro Uncertainty

China

Beijing Enlight Media Company Limited invest, produces and distributes television programs, films and teleplays. The Company's major products include TV shows, TV entertainment programs, films and drama series.

Jiangsu Phoenix Publishing & Media Corporation Limited publishes, distributes books, publications and audio-visual products, and sells cultural goods. The Company's main products include textbooks, teaching aids, and general books.

China South Publishing & Media Group Company Ltd. is a media company.  The Company prints, publishes and distributes books, newspapers and journals; develops audio-visual materials; and offers digital publishing services.

China Literature is the largest online literature platform in China

Wanda Film Holding Co., Ltd operates cinemas. The Company provides film production, television production, film distribution, film screening, and other services. Wanda Film Holding also operates cinema construction investments, advertising production, and other businesses.

Chinese Universe Publishing and MediaCo., Ltd. manufactures enamel-covered wires and other copper wires.  Through its subsidiaries, the Company also manufactures buses and related parts.

Chinese Universe Publishing&Media (600373 CH)

ChineseAll Digital Publishing Group Co Ltd provides digital and print publishing services in China.

Chineseall Digital Publishing (300364 CH)

Jiangsu Broadcasting Cable Information Network Corporation Limited offers media services. The Company provides digital television and pay-television programs. Jiangsu Broadcasting also offers broadband network services.

CITIC Guoan Information Industry Co., Ltd., through its subsidiary, installs, tests, and operates cable TV and satellite telecommunication networks. The Company also develops real estate properties .  In addition, CITIC designs network integrated systems and application software, and provides advertising services.

Visual China Group Co., Ltd. manufactures cultural and entertainment products and technologies. The Company's products include radio and television transmission technology, Internet transmission, Internet games and entertainment, mobile communications network gaming and entertainment technology, and computer software development.

Pearson plc provides education products and services to institutions, governments and individual learners in over 80 countries. The Company's major revenue markets are North America, 'Core' including the UK, Italy and Australia and 'Growth' including Brazil, China and South Africa. It also owns the Financial Times, 50% of the Economist and 47% of Penguin Random House.

Sirius XM Holdings Inc. broadcasts various channels of audio from its satellites. The Company provides its services throughout the continental United States for a monthly subscription fee. Sirius delivers various streams of commercial-free music in every genre, as well as streams of  news, sports, weather, talk, comedy, and public radio.

The New York Times Company operates media businesses.  The Company publishes daily newspapers and operates Internet websites.  The newspapers and websites distribute news and entertainment.

News Corporation operates in the publishing industry. The Company provides publications consisting of newspapers, magazines, books and promotional inserts.

TOHO CO., LTD. produces and distributes motion pictures for cinema, television, and video.  The Company also sells character merchandise based on their media productions, distributes foreign films, operates musical theaters, and produces musical shows. In addition, Toho manages movie theaters in urban areas.

The Interpublic Group of Companies, Inc. is an organization of advertising agencies and marketing service companies.  The Company operates globally in the sectors of advertising, independent media buying, direct marketing, healthcare communications, interactive consulting services, marketing research, promotions, experiential marketing, public relations, and sports marketing.

Liberty Global plc owns interests in broadband, distribution, and content companies operating outside the continental United States, principally in Europe, Asia, and Latin America.

DENTSU INC. mainly provides comprehensive advertising services.  The Company also provides marketing and event planning & promotion services.  Dentsu has associated companies in the US, Europe, and Asia.

Liberty Broadband Corporation invests in communication companies. The Company has principal assets in TruePosition and Time Warner Cable.

Nexstar Broadcasting Group, Inc, is a television broadcasting company focused on the acquisition, development, and operation of television stations in medium using traditional media, e-MEDIA, digital and mobile media platforms. Nexstar Broadcasting Group, Inc offers its services in the central east part of United States.

Nexstar Broadcasting Group, Inc (NXST US)

Tencent Music Entertainment operates an online music entertainment platform in China. The Company offers platform that comprises of online music, recording, music-centric live streaming enabling users to discover, listen, sing, watch, perform, and socialize music.

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Tencent Music (TME US)

Tencent Music Entertainment Group: How Are They Enhancing User Engagement through Artificial Intelligence? - Major Drivers

Tencent Music Entertainment Group, a leading player in China's music streaming industry, started the year 2024 with some substantial financial and...

Baptista Research

TME (TME US) - 1Q24 Beat on Strong Music Business Growth and GPM Expansion

TME reported 1Q24 results: total revenue declined by 3% YoY to RMB6.77bn, beating consensus estimate by 3% on strong online music revenue growth

CMB International

Tencent Music Entertainment Group: Initiation Of Coverage - Core Business Strategy

Tencent Music Entertainment Group (TME) posted robust results in its fourth quarter and full year 2023 earnings call. Increasing subscribers and...

Baptista Research

TME (TME US) - Expect Solid Core Music Business and GPM Expansion in FY24

TME announced its 4Q23 results on 19 Mar: total revenue decreased by 7% YoY to RMB6.9bn, 3% ahead of consensus/our estimate thanks to the robust...

CMB International

TME (TME US) - Online Music Business Maintains Solid Growth Amid Macro Uncertainty

TME is making steady progress in online music paying user growth: we expect 4Q23 total revenue to decline by 10% YoY to RMB6.7bn, but non-IFRS net...

CMB International

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