研究报告全文：MN6Jan2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateCloudMusic9899HKSolidcoremusicbusinessoutlookonenrichingcontentlibraryTargetPriceHK10860CloudMusicisontherighttrackofimprovingmonetizationandexpandingmarginPreviousTPHK11000Announcedon1JanuaryCloudMusicaddedlicensingagreementwiththeleadingUpDownside86TaiwanmusiclabelBin-MusicwhichfurtherenricheditscontentlibraryandCurrentPriceHK10000representedanothermilestonesincetheendofexclusivelicensingWeremainbullishonthecompanysmusicsubscriptionbusinesssupportedbyitsenrichingChinaInternetcontentlibraryandrisingpayingratioWelowerFY22FY23FY24totalrevenuebySaiyiHECFA279toRMB89108128bntoreflectmoreconservativeviewonsocial85239161739entertainmentbusinesswhichfacesmacroheadwindsandintensifyinghesaiyicmbicomhkcompetitionWelowerourFY23FY24Eadjustednetincomeforecastto-RMB59mnRMB529mnpreviousRMB75535mnWenowexpecttheWentaoLUcompanytoachieveaquarterlybreakevenbyend-FY23EsupportedbyitsgrossluwentaocmbicomhkmarginimprovementWerollforwardourvaluationtoFY23EandderivedourtargetpriceofHK1086previousHK1100basedonDCFmethodMaintainBUYYeTAOfranktaocmbicomhkOnlinemusicbusinesstoacceleratefrom2H22onwardsWeforecastonlinemusicrevenuetogrowby152319YoYtoRMB194654bninStockData2H22FY23FY24E1H2211YoYdrivenbythesolidmusicsubscriptionMktCapHKmn207995growthandrecoveryofadbusinessOn1JanthecompanyannouncedAvg3mthstoHKmn69252wHighLowHK145705315licensingagreementwithBin-MusicthecopyrightholderofseveraltopsingersTotalIssuedSharesmn2080suchasMaydayandJonathanLeeTheenrichingcontentlibrarycouldhelponSourceFactSetusertrafficandsubscribergrowthinourviewWeestimateMPUstoincreaseby372218YoYinFY22FY23FY24Ewithpayingratiorisingto285inShareholdingStructureNetEase614FY24EFY21158Fornon-subscriptionbusinessCloudMusiclaunchedAlibaba99thefreemiummodein4Q22torevitalizeitsadbusinessDrivenbyrecoveryofSourceCompanydataaddemandandnewinitiativesweexpectadrevenuewillreturntopositivegrowthinFY23FY24ESharePerformanceAbsoluteRelativeExpectsocialentertainmentbusinesstorecoverin2023Social1-mth305209entertainmentbusinessfacesintensifyingcompetitionfromotherentertainment3-mth4392356-mth259294formatsTheresurgenceofCOVID-19andthemacroimpactin4Q22alsoSourceFactSetpressuresocialentertainmentrevenuegrowthWeexpectdeceleratingrevenuegrowthfrom4Q22onwardsWeforecastthesegmentrevenuetogrow12-mthPricePerformance402018YoYtoRMB526273bninFY22FY23FY24EwithitsmonthlyARPPUnormalizingfromRMB452inFY21toRMB286inFY24ESteadymarginexpansionmayhelpreachingtheprofitabilitytargetWeexpectCloudMusicsgrossmargintoexpandsteadilyfrom20inFY21to137171211inFY22FY23FY24EthankstotheoptimizedcoststructureCloudMusicsgrossmarginstillhasamplepotentialcomparedtothatofTME301inFY21TheimprovinggrossmarginwillsupportadjustednetmarginSourceFactSettoimprovefrom-149inFY21to-40-0541inFY22FY23FY24EbasedonourestimateCloudMusicistradingat17x2023EPSatanattractivediscountcomparedwithTME35x2023EPSEarningsSummaryYE31DecFY20AFY21AFY22EFY23EFY24ERevenueRMBmn4896699888891078912769YoYgrowth1112429270214184Grossmargin12220137171211AdjustednetprofitRMBmn156801043735235925287EPSAdjustedRMBcents1283905023716939284825418ConsensusEPSRMBcents1283905023726467361425732PSx3726211714PExnananana457SourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk6Jan2023BusinessforecastsupdateandvaluationWelowerFY22FY23FY24totalrevenueby279toRMB89108128bnmainlyduetomoreconservativeviewonsocialentertainmentbusinessoutlookwhichfacesmacroheadwindsandintensifyingcompetitionWealsolowerourFY23FY24Eadjustednetincomeforecastto-RMB59mnRMB529mnpreviousRMB75535mnWenowexpectthecompanytoachieveaquarterlybreakevenbyend-FY23EmainlysupportedbyitsgrossmarginimprovementFigure1CloudMusicforecastrevisionCurrentPreviousChangeRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue8889107891276990921159514006-22-70-88GrossProfit12181846269111711971279740-64-38OperatingProfit531238397527112388NANA23Adjustednetprofit3525952934675535NANA-12AdjustedEPSRMB170325170426NANA-12GrossMargin13717121112917020008ppt01ppt11pptOperatingMargin-60-2231-58-1028-02ppt-12ppt03pptAdjustednetmargin-40-0541-380638-02ppt-12ppt03pptSourceCMBIGMestimatesFigure2CMBIGMestimatesvsconsensusCMBIGMConsensusDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue8889107891276992151142013406-35-55-48GrossProfit12181846269112101988284806-72-55OperatingProfit531238397642376565NANA-298Adjustednetprofit35259529393101565NANA-65AdjustedEPSRMB170325260426NANA-12GrossMargin13717121113117421206ppt-03ppt-02pptOperatingMargin-60-2231-70-334210ppt11ppt-11pptAdjustednetmargin-40-0541-43-094203ppt03ppt-01pptSourceCompanydataCMBIGMestimatesFigure3CloudMusicfinancialsummaryRMBmn202020212022E2023E2024EOnlinemusicsegmentOnlinemusicMAUsmn18051826182619171994YoY22612005040Onlinemusicpayingusersmn160289395483568YoY850811368222176Payingratio88158217252285Onlinemusicrevenue26233290371845685433YoY476254130229189Subscriptionrevenue16042324306738614678YoY661449320259211Non-subscriptionrevenue1019966651707755YoY256-51-3278768SocialentertainmentsegmentSocialentertainmentpayingusersmn0307141721YoY25671089978293222Socialentertainmentrevenue22733708517162207336YoY3198631395203179OverallPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE26Jan2023Totalrevenue4896699888891078912769YoY1112429270214184Grossprofitmargin-12220137171211SMexpenseratio6762757568RDexpenseratio118124113108102Adjustednetlossmargin-320-149-40-0541Adjustednetloss-1568-1044-352-59529SourceCompanydataCMBIGMestimatesBasedonDCFvaluationWACCof147andterminalgrowthof25ourtargetpriceofCloudMusicisHK1086whichimplies23x19x20222023EPSCloudMusiccurrentlytradesat17x2023EPSatanattractivediscountcomparedwithTME34x2023EPSItscurrentvaluationoffersanattractiverisk-rewardinourviewgivenCloudMusicsstrongrevenueCAGRandmarginimprovementpotentialoverFY21-FY24EFigure4CloudMusicDCFvaluationRMBmn2023E2024E2025E2026E2027E2028E2029E2030EAdjustedEBITDA191440100914351917234426482974Freecashflow17150693112281569187321432417NPVofFCF5859Discountedterminalvalue7829Enterprisevalue13688Netcash6441Equityvalue20130Numberofsharesdilutedmn208ExchangerateHKDRMB089ValuationpershareHK1086Riskfreerate28Beta1210Equityriskpremium98Costofequity147Costofdebt50Taxrate150DebtcapitalNetCashWACC147TerminalFCFgrowth25SourceCMBIGMestimatesFigure5CloudMusicpeervaluationcomparisonCompaniesTickerPriceRevenuegrowthYoYPSx2Q22MAUMarketCapMAULocal2022E2023E2024E2022E2023E2024EmnUSTMETMEUS891534150373634593257SpotifySPOTUS81691150137131110433362BilibiliBILIUS29255213177373026306382Kuaishou1024HK79470161154322824587744Average302623436SourceBloombergCMBIGMNotedataareasof5Jan2023PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE36Jan2023FinancialSummaryINCOMESTATEMENT2019A2020A2021A2022E2023E2024EYE31DecRMBmnRevenue23184896699888891078912769Costofgoodssold3375549168557671894310078Grossprofit1057595143121818462691Operatingexpenses5839291490174920842294Sellingexpense223327431667809871Adminexpense5597264169205230RDexpense363576869100411651296Others5971759196103Operatingprofit163915251347531238397Investmentgainloss142344Othergainslosses4231522755000Interestincome7910148706771Interestexpense2900000Pre-taxprofit201429502051458167472Incometax2251071Aftertaxprofit201629512056459167401Netprofit201629512056459167401Adjustednetprofit15801568104435259529BALANCESHEET2019A2020A2021A2022E2023E2024EYE31DecRMBmnCurrentassets825668638769866290759924Cashequivalents9113006853326347698Accountreceivables374254674727750799Prepayment144716421345141114631579STbankdeposits51678175528580460946399FinancialassetsatFVTPL339971241265291320Othercurrentassets18172128128128128Non-currentassets7811195619631617606PPE242144494862Right-of-useassets0011111111InvestmentinJVsassos748993939393Othernon-currentassets6831085471479465440Totalassets9037805793889293969110529Currentliabilities121121731948219226052895Accountpayables12610000Taxpayable110000Othercurrentliabilities23914656565656Leaseliabilities003333Contractliabilities1753856057689711149Accruedexpenses67016401284136515751686Non-currentliabilities10772111925872116136Convertiblebonds10764111620000Othernon-currentliabilities8295872116136Totalliabilities11983133642006226427213030Sharecapital000000Retainedearnings5423837210600110591122610825Otherreserves2478306617982180881819618324Totalshareholdersequity294653077382702969707499Totalequityandliabilities9037805793889293969110529PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE46Jan2023CASHFLOW2019A2020A2021A2022E2023E2024EYE31DecRMBmnOperatingProfitbeforetaxation201429502051458167472Depreciationamortization142215323519Taxpaid2261071Changeinworkingcapital86531177130396169Others3811429957364057Netcashfromoperations1706969908260304646InvestingCapitalexpenditure152140363533Acquisitionofsubsidiariesinvestments9265653411544300317334Netproceedsfromdisposalofshort-term6816100457681000investmentsOthers248540706771Netcashfrominvesting244034063862267284296FinancingProceedsfromshareissues732402679000Sharerepurchases000000Others283632165000Netcashfromfinancing44883212614000NetchangeincashCashatthebeginningoftheyear5519113006853326347Exchangedifference18214000Cashattheendoftheyear9113006853326347698GROWTH2019A2020A2021A2022E2023E2024EYE31DecRevenue10191112429270214184Grossprofitnanana7534516458PROFITABILITY2019A2020A2021A2022E2023E2024EYE31DecGrossprofitmargin45612220137171211Operatingmargin707311192602231Adjnetprofitmargin682320149400541ReturnonequityROEnana1982642455GEARINGLIQUIDITYACTIVITIES2019A2020A2021A2022E2023E2024EYE31DecNetdebttoequityxnana09090909Currentratiox683245403534Receivableturnoverdays589190351299254228VALUATION2019A2020A2021A2022E2023E2024EYE31DecPEnanananana457PEdilutednanananana457PBnana38262624SourceCompanydataCMBIGMestimatesNoteThecalculationofnetcashincludesfinancialassetsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE56Jan2023DisclosuresDisclaimersAnalystCertificationTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportinwholeorinpartcertifiesthatwithrespecttothesecuritiesorissuerthattheanalystcoveredinthisreport1alloftheviewsexpressedaccuratelyreflecthisorherpersonalviewsaboutthesubjectsecuritiesorissuerand2nopartofhisorhercompensationwasisorwillbedirectlyorindirectlyrelatedtothespecificviewsexpressedbythatanalystinthisreportBesidestheanalystconfirmsthatneithertheanalystnorhisherassociatesasdefinedinthecodeofconductissuedbyTheHongKongSecuritiesandFuturesCommission1havedealtinortradedinthestockscoveredinthisresearchreportwithin30calendardayspriortothedateofissueofthisreport2willdealinortradeinthestockscoveredinthisresearchreport3businessdaysafterthedateofissueofthisreport3serveasanofficerofanyoftheHongKonglistedcompaniescoveredinthisreportand4haveanyfinancialinterestsintheHongKonglistedcompaniescoveredinthisreportCMBIGMoritsaffiliateshaveinvestmentbankingrelationshipwiththeissuerscoveredinthisreportinpreceding12monthsCMBIGMRatingsBUYStockwithpotentialreturnofover15overnext12monthsHOLDStockwithpotentialreturnof15to-10overnext12monthsSELLStockwithpotentiallossofover10overnext12monthsNOTRATEDStockisnotratedbyCMBIGMOUTPERFORMIndustryexpectedtooutperformtherelevantbroadmarketbenchmarkovernext12monthsMARKET-PERFORMIndustryexpectedtoperformin-linewiththerelevantbroadmarketbenchmarkovernext12monthsUNDERPERFORMIndustryexpectedtounderperformtherelevantbroadmarketbenchmarkovernext12monthsCMBInternationalGlobalMarketsLimitedAddress45FChampionTower3GardenRoadHongKongTel85239000888Fax85239000800CMBInternationalGlobalMarketsLimitedCMBIGMisawhollyownedsubsidiaryofCMBInternationalCapitalCorporationLimitedawhollyownedsubsidiaryofChinaMerchantsBankImportantDisclosuresTherearerisksinvolvedintransactinginanysecuritiesTheinformationcontainedinthisreportmaynotbesuitableforthepurposesofallinvestorsCMBIGMdoesnotprovideindividuallytailoredinvestmentadviceThisreporthasbeenpreparedwithoutregardtotheindividualinvestmentobjectivesfinancialpositionorspecialrequirementsPastperformancehasnoindicationoffutureperformanceandactualeventsmaydiffermateriallyfromthatwhichiscontainedinthereportThevalueofandreturnsfromanyinvestmentsareuncertainandarenotguaranteedandmayfluctuateasaresultoftheirdependenceontheperformanceofunderlyingassetsorothervariablemarketfactorsCMBIGMrecommendsthatinvestorsshouldindependentlyevaluateparticularinvestmentsandstrategiesandencouragesinvestorstoconsultwithaprofessionalfinancialadvisorinordertomaketheirowninvestmentdecisionsThisreportoranyinformationcontainedhereinhavebeenpreparedbytheCMBIGMsolelyforthepurposeofsupplyinginformationtotheclientsofCMBIGMoritsaffiliatestowhomitisdistributedThisreportisnotandshouldnotbeconstruedasanofferorsolicitationtobuyorsellanysecurityoranyinterestinsecuritiesorenterintoanytransactionNeitherCMBIGMnoranyofitsaffiliatesshareholdersagentsconsultantsdirectorsofficersoremployeesshallbeliableforanylossdamageorexpensewhatsoeverwhetherdirectorconsequentialincurredinrelyingontheinformationcontainedinthisreportAnyonemakinguseoftheinformationcontainedinthisreportdoessoentirelyattheirownriskTheinformationandcontentscontainedinthisreportarebasedontheanalysesandinterpretationsofinformationbelievedtobepubliclyavailableandreliableCMBIGMhasexertedeveryeffortinitscapacitytoensurebutnottoguaranteetheiraccuracycompletenesstimelinessorcorrectnessCMBIGMprovidestheinformationadvicesandforecastsonanASISbasisTheinformationandcontentsaresubjecttochangewithoutnoticeCMBIGMmayissueotherpublicationshavinginformationandorconclusionsdifferentfromthisreportThesepublicationsreflectdifferentassumptionpoint-of-viewandanalyticalmethodswhencompilingCMBIGMmaymakeinvestmentdecisionsortakeproprietarypositionsthatareinconsistentwiththerecommendationsorviewsinthisreportCMBIGMmayhaveapositionmakemarketsoractasprincipalorengageintransactionsinsecuritiesofcompaniesreferredtointhisreportforitselfandoronbehalfofitsclientsfromtimetotimeInvestorsshouldassumethatCMBIGMdoesorseekstohaveinvestmentbankingorotherbusinessrelationshipswiththecompaniesinthisreportAsaresultrecipientsshouldbeawarethatCMBIGMmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreportandCMBISwillnotassumeanyresponsibilityinrespectthereofThisreportisfortheuseofintendedrecipientsonlyandthispublicationmaynotbereproducedreprintedsoldredistributedorpublishedinwholeorinpartforanypurposewithoutpriorwrittenconsentofCMBIGMAdditionalinformationonrecommendedsecuritiesisavailableuponrequestForrecipientsofthisdocumentintheUnitedKingdomThisreporthasbeenprovidedonlytopersonsIfallingwithinArticle195oftheFinancialServicesandMarketsAct2000FinancialPromotionOrder2005asamendedfromtimetotimeTheOrderorIIarepersonsfallingwithinArticle492atodHighNetWorthCompaniesUnincorporatedAssociationsetcoftheOrderandmaynotbeprovidedtoanyotherpersonwithoutthepriorwrittenconsentofCMBIGMForrecipientsofthisdocumentintheUnitedStatesCMBIGMisnotaregisteredbroker-dealerintheUnitedStatesAsaresultCMBIGMisnotsubjecttoUSrulesregardingthepreparationofresearchreportsandtheindependenceofresearchanalystsTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportisnotregisteredorqualifiedasaresearchanalystwiththeFinancialIndustryRegulatoryAuthorityFINRATheanalystisnotsubjecttoapplicablerestrictionsunderFINRARulesintendedtoensurethattheanalystisnotaffectedbypotentialconflictsofinterestthatcouldbearuponthereliabilityoftheresearchreportThisreportisintendedfordistributionintheUnitedStatessolelytomajorUSinstitutionalinvestorsasdefinedinRule15a-6undertheUSSecuritiesExchangeActof1934asamendedandmaynotbefurnishedtoanyotherpersonintheUnitedStatesEachmajorUSinstitutionalinvestorthatreceivesacopyofthisreportbyitsacceptancehereofrepresentsandagreesthatitshallnotdistributeorprovidethisreporttoanyotherpersonAnyUSrecipientofthisreportwishingtoeffectanytransactiontobuyorsellsecuritiesbasedontheinformationprovidedinthisreportshoulddosoonlythroughaUS-registeredbroker-dealerForrecipientsofthisdocumentinSingaporeThisreportisdistributedinSingaporebyCMBISingaporePteLimitedCMBISGCompanyRegnNo201731928DanExemptFinancialAdviserasdefinedintheFinancialAdvisersActCap110ofSingaporeandregulatedbytheMonetaryAuthorityofSingaporeCMBISGmaydistributereportsproducedbyitsrespectiveforeignentitiesaffiliatesorotherforeignresearchhousespursuanttoanarrangementunderRegulation32CoftheFinancialAdvisersRegulationsWherethereportisdistributedinSingaporetoapersonwhoisnotanAccreditedInvestorExpertInvestororanInstitutionalInvestorasdefinedintheSecuritiesandFuturesActCap289ofSingaporeCMBISGacceptslegalresponsibilityforthecontentsofthereporttosuchpersonsonlytotheextentrequiredbylawSingaporerecipientsshouldcontactCMBISGat6563504400formattersarisingfromorinconnectionwiththereportPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE6