Paid singles such as “Say Well, Don’t Cry” are all over the Internet. Many people have been fanned by Tencent’s music circle, and their music revenue growth rate is also exceeding the growth rate of content costs. Can Tencent Music usher in an inflection point in stock prices in 2020?
Editor’s note: This article is from Huasheng College, author Oliver; published with permission.
Tencent Music will release the fourth quarter and full-year financial report for 2019 after the close of the US stock market on March 16, 2020 EST (March 17, Beijing time).
In the third quarter, Jay Chou’s “Say No Cry” exploded the social network and brought a lot of heat to Tencent Music. Regarding the fourth quarter financial report, what are the highlights of Tencent Music, and whether the weak stock price of Tencent Music can be bought How was the business of music in the past? Let’s talk about Tencent music together today.
I. Review of Q3 earnings report and the trend of stock prices
Source: Huasheng Securities
Q3 financial report
Tencent Music released its third quarter 2019 performance report on November 12, 2019: In Q3 2019, Tencent Music’s total revenue reached 6.5 billion yuan, an increase of 31% year-on-year, and the growth rate remained the same as the previous quarter. 2) Online music service revenue reached 1.846 billion yuan, a slight increase (28.4% in the current period, the previous value was 26.5%), a year-on-year increase of 26.2%, of which member subscription income reached 942 million yuan (a year-on-year increase of 48.3%), and other income It reached 904 million yuan (an increase of 9.18% year-on-year); revenue from social entertainment services reached 4.66 billion yuan, an increase of 32.9% year-on-year and a 7.5% quarter-on-quarter increase.
Stock price performance after earnings report
After the financial report was released, the stock price performance was relatively weak. On the whole, from the closing price of US $ 14.37 on November 11 to US $ 11.40, the stock price of Tencent Music fell by 20.67% within the range. For the whole of 2019, Tencent Music’s stock price fell by 11.2%.
Q3 Tencent music appeared phenomenal explosions such as “say no cry”, “Lover”, and the number of users has grown rapidly
Source: QQ Music
On September 16th at 11:00, Jay Chou ’s single “Say No Cry” was launched on three music platforms: QQ Music, Cool Me Music, and Cool Dog Music. After 25 minutes, the total sales volume exceeded 2.29 million, and the sales exceeded 6.8 million yuan; less than 24 hours, sales of “Say No Cry” exceeded 20 million yuan, becoming the highest-selling digital single in the history of QQ music platform. As of the end of September, total sales of “Say No Cry” exceeded 9.8 million ;
In addition, Taylor Swift ’s seventh studio album “Lover” was released on TME 3 on August 9th. As of the end of August, QQ Music ’s sales had exceeded 5.58 million yuan, and QQ Music ’s diamond record certification, And continue to lead the sales of major domestic platforms;
Source: Network
Online music paid users are in the top 3 worldwide, with growth reaching a new high of nearly 3 years, and the payment rate continues to increase strongly.
Source: Industrial Securities
Behind the explosion of popular models is the rapid growth of paying users. In Q3 2019, there were 35.4 million paying users, a year-on-year increase of 42.2%, the payment rate increased to 5.4%, and a month-on-month increase of 0.6 pcts; the monthly ARPPU of online music was 8.9 yuan (YoY + 4.7%). At present, the total number of Tencent Music paying users is only second In Spotify, Apple Music, ranked third in the world.
Second, how does the management think of TencentHappy
After the earnings report, Tencent Music Entertainment Group CEO Peng Jiaxin, Chief Strategy Officer (CSO) Ye Zhuodong and CFO Hu Min attended the subsequent conference call, interpreted the earnings report, and answered analyst questions.
Jay Chou’s single contribution
Ye Zhuodong: The company highly appreciates the cooperation with Jay Chou, and its singles did contribute to the company’s third-quarter electronic album business revenue, but the company did not include it in the paid music library in the third quarter, and will make corresponding contributions in the future. .
The company’s fourth quarter business trend forecast: the fourth quarter growth will be stronger than the third quarter
Ye Zhuodong: The company does not make specific forecasts, but focuses on long-term growth goals. Based on past records, the company ’s online music business ’s revenue in the fourth quarter usually has an accelerated growth over the third quarter, which is mainly driven by the accelerated growth of revenue contributed by paid members. The growth of the social entertainment business should be in line with the third quarter, which may be lower than our previous forecast, mainly due to market competition from short video companies. Overall, revenue growth in the fourth quarter will be slightly better than in the third quarter.
About copyright and paid users: revenue growth exceeds content cost growth
Ye Zhuodong: Regarding the price of copyright licensing, the cost of content has been rising, but the revenue growth rate of the company’s paid members has still exceeded the growth rate of content costs.
Peng Jiaxin: The company is also continuously investing in technology to optimize the efficiency of content distribution. Tencent Music has the largest content library in the market. We will make full use of our content to help the company’s future development.
Focus on paying rate more in the future, there is no current price increase plan
Peng Jiaxin: The company currently has no plans to raise prices. At present, we mainly focus on how to increase the user’s payment rate. There is still a lot of room for growth in the future.
III. New financial report on Tencent Music
Source: Network
“House economy” may promote music business
Tencent donated a special material for frontline medical staff during this difficult period of the epidemic: including 100,000 QQ music members, 100,000 national K song members, etc., which were well received by people. During the epidemic, “House Economy” gave birth to people’s yearning for online entertainment. In this Spring Festival where everyone is at home, music is essential. Tencent Music is expected to benefit from “House Economy”. Online musicThe music business and live broadcast business are expected to be driven, giving a beautiful Four Seasons report.
Source: Industrial Securities
Can online music services increase the proportion?
But it is undeniable that despite the huge content payment, at present, more than 70% of the company’s revenue is contributed by the full social entertainment business. In the Q4 financial report, if the proportion of online music service revenue can be further increased, Tencent Music’s future revenue will be more stable.
Follow the management’s forecast of the acceleration of growth in the fourth quarter can be achieved
Management expects that revenue growth in the fourth quarter will be slightly better than that in the third quarter. The social entertainment business will remain the same as in the third quarter. Investors can keep an eye on the earnings report.