China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

[Tencent Music (TME US, SELL, TP US$5.7) TP Change]: Competition Remains the Biggest Downward Factor

[Tencent Music (TME US) Target Price Change]: Cut TP as Offline Music Activities Begin to Thrive

[Tencent Music (TME US) Target Price Change]: Cut TP for Competition Pressure and Cost Rebound

China/Asia TMT

Shawn Yang

Equity Bottom-Up

<ul>
<li>We expect the 2Q23 online music revenue growth to be 34.4% YoY, driven by more promotions to drive up users’ retentions;</li>
<li>We anticipate the 2Q23 social entertainment growth rate to be (12.9%) YoY, due to intense competition and strengthened regulatory in live streaming. </li>
<li>We expect TME's 2Q23’s rev./non-GAAP net income to be (1.8%)/ (3.9%) vs cons. We maintain SELL because of continuous pressure from Bytedance’s Soda Music, Wechat Video Account and Kuaishou.</li>
</ul>


We expect the 2Q23 online music revenue growth to be 34.4% YoY, driven by more promotions to drive up users’ retentions;
We anticipate the 2Q23 social entertainment growth rate to be (12.9%) YoY, due to intense competition and strengthened regulatory in live streaming. 
We expect TME's 2Q23’s rev./non-GAAP net income to be (1.8%)/ (3.9%) vs cons. We maintain SELL because of continuous pressure from Bytedance’s Soda Music, Wechat Video Account and Kuaishou.


[Tencent Music (TME US, SELL, TP US$6) Preview]: Competition Is Still a Concern, Maintain SELL