Tencent Music Entertainment Group | Asia Pacific Risk Reward Update

Research evidence excerpt

Tencent Music Entertainment Group | Asia Pacific Risk Reward Update

Update

July 21, 2026 06:30 AM GMT

Morgan Stanley Asia Limited+MTencent Music Entertainment Group | Asia Pacific Yang Liu

Equity Analyst

Risk Reward Update Yang.Liu@morganstanley.com +852 2239-1911

What’s Changed

Tencent Music Entertainment Group (TME.N) From To

Price Target US$12.30 US$10.50

Bull Case US$19.90 US$15.10

Tencent Music Entertainment Group (TME.N, TME UN)

Base Case US$12.30 US$10.50

Bear Case US$8.30 US$7.40 Greater China Media | China

Updated Components Stock Rating Equal-weight

EPS Industry View In-Line

Price target US$10.50

Bull Base Bear Scenarios

Shr price, close (Jul 20, 2026) US$9.17

Risks to Price Target / Rating 52-Week Range US$26.70-7.94

Fiscal Year Ending 12/25 12/26e 12/27e 12/28e

Risk Reward for Tencent Music Entertainment Group (TME.N) EPS (Rmb)** 6.17 6.44 6.95 7.35

Prior EPS (Rmb)** - 6.72 7.22 7.80

has been updated

Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare

framework

Reason for change ** = Based on consensus methodology

e = Morgan Stanley Research estimates

We increased subscription revenue by 11-16% in 2026-28E to incorporate Ximalaya's

revenue contribution (starting 2Q26), partially offset by lower advertising and social

entertainment revenue due to the competition from Soda Music. Our GPM was

increased by 1.5-1.8ppt, incorporating higher Ximalaya GPM. We lower our 2026-28E

EPS estimates by 4.2%/3.8%/5.8%, primarily reflecting dilution from new shares

issued for the acquisition, while net profit remains unchanged as acquisition benefits

are offset by the weaker core business.

Our PT/base case was reduced by 14.6% to US$10.5. Other than estimates changes,

we rolled forward our valuation by three months to June 2027 and deducted the