Investment Rating - The report maintains a "Buy" rating for NetEase Cloud Music (9899.HK) and raises the target price to HKD 190, indicating a potential upside of 16% from the current price of HKD 163.2 [2][3][20] Core Insights - The company's revenue for 2H24 is projected at RMB 38.8 billion, a year-on-year decline of 2.0%, which is below market expectations by 3.3%. However, the gross margin improved by 3.6 percentage points to 32.4%, driven by growth in online music service revenue and optimized cost control. The adjusted net profit is expected to be RMB 8.2 billion, exceeding market expectations of RMB 5.9 billion, with an adjusted net profit margin increasing by 8.8 percentage points to 21.1% [1][2] - Online music services continue to show strong performance, with subscription revenue growing by 19% year-on-year. The 2H24 online music service revenue is expected to reach RMB 27.9 billion, reflecting a 20.0% year-on-year increase and a 7.9% quarter-on-quarter increase. The monthly active users (MAU) are steadily increasing, and the daily active users (DAU) to MAU ratio remains above 30%, indicating high user engagement and stickiness [1][2] - The social entertainment service segment is undergoing a strategic contraction, with revenue for 2H24 expected to be RMB 10.8 billion, down 33.4% year-on-year. The company is focusing on its core music business and has simplified its app to reduce distractions from non-core services. Despite the expected decline in social entertainment revenue, cost reductions are anticipated to mitigate the impact on overall profitability [2][3] Financial Projections - The report projects the following financial metrics for NetEase Cloud Music: - FY24 revenue: RMB 7.95 billion - FY25E revenue: RMB 8.08 billion - FY26E revenue: RMB 8.63 billion - FY27E revenue: RMB 9.16 billion - Adjusted net profit for FY25E: RMB 16.2 billion - Adjusted net profit for FY26E: RMB 18.1 billion - Target P/E for FY25E: 23.2x - Target P/E for FY26E: 20.8x [3][9]
网易云音乐：利润持续改善，会员规模稳健扩张-20250227