HSBC Global Research has resumed its Buy rating on CNBM (03323.HK) and lowered the target price from $8.5 to $4.1. The company's earnings this year are expected to be under pressure due to the weak cement business. However, HSBC forecasts that earnings will bottom out this year and recover from next year onwards due to stabilizing cement margins, expansion of overseas cement business, and moderate growth in new materials business [ee416e20].
HSBC has raised its price target for Tencent Music shares to $10.40 from $9.50, while maintaining a Hold rating on the stock. The adjustment reflects a more favorable view on the company's gross margin expansion, which exceeded expectations in Q4 2023. The revised gross profit margin forecasts for 2024 and 2025 are now set at 39.7% and 40.9%, respectively. Factors contributing to the gross margin improvement include the online music segment's operating leverage, increased advertising revenue, and growth of self-developed content. However, potential increases in marketing and administrative spending could partially offset these positive developments. HSBC has marginally increased its non-GAAP net profit forecasts for 2024 and 2025 by 3% and 4%, respectively. The firm considers the current valuation of Tencent Music to be fair, with the stock trading at 17 times the estimated 2024 earnings per share (P/E). HSBC also notes Tencent Music's efforts to return value to shareholders through share buybacks and the evaluation of other options, such as dividends [31aa706d].
Citi has upgraded shares of Tencent Music Entertainment Group stock to Buy from Neutral, with a new price target set at $13. Tencent Music reported a year-over-year decline in total revenue of 7.2% to RMB 6.89 billion, while adjusted net profit rose by 12.5% to RMB 1.68 billion. The better-than-anticipated results were primarily driven by strong performance in online music revenues, improved advertising revenues, higher gross profit margins, and lower general and administrative expenses than expected. Tencent Music's management has expressed optimism about achieving steady growth in music net additions and ARPPU in Q1 2024 and the full fiscal year. Citi's new price target of $13 is based on a 17 times multiple, applying a 1.0x price-to-earnings growth (PEG) ratio, and rolling forward to the 2025 estimated earnings per share of $0.76 [9f51866d].
Morgan Stanley has increased its shares price target for Tencent Music Entertainment Group (TME) to $13.50, up from $11.00, while maintaining an Overweight rating on the stock. The firm believes that TME is on track to meet its medium-term goals of growing its subscriber base and average revenue per paying user (ARPPU) by 50% over the next three to five years, starting from 2023. The first quarter of 2024 showed promising growth with music subscription net additions accelerating and matching the high run-rate from the first quarter of 2023, which saw 5.9 million new users. Revenue from music is projected to grow by over 40% year-over-year in the first quarter of 2024. Morgan Stanley sees significant growth potential for TME, citing factors such as the potential for upselling higher-priced membership plans and the lower ARPPU compared to other entertainment formats in China. The firm has also revised its net addition outlook for 2024 to 17 million, suggesting a 17% growth in the total paying user base [5d900050].
HSBC has initiated coverage of Spotify with a Buy rating and a $310 price target. The bank sees significant opportunities for Spotify beyond music, citing its active user base of 602 million. HSBC believes that Spotify's cross-selling strategy from music to podcasts and audiobooks is built on firm ground and that the company has the potential to capture a $170 billion market opportunity by 2030. The bank also highlights Spotify's potential in other revenue streams such as merchandising and ticket sales. HSBC expects Spotify to achieve operating profitability in 2024 [abafdd26].
Overall, the market sentiment is positive, driven by strong earnings and the health of the US economy.