First Read: Tencent Music Entertainment "1Q26 earnings review: Steady..."

研报英文原文证据摘录

First Read: Tencent Music Entertainment "1Q26 earnings review: Steady..."

isition: SAMR announced the approval for Ximalaya acquisition

12/27E 7.31 7.30 -0 7.27

today (news), with conditions restricting TME from engaging in monopolistic practice or 12/28E 8.01 7.96 -1 8.02

unfair competition. While we await more detail in the deal's timetable and financial

implications, we believe it is likely to close in 2H26. 2) Shareholder returns: Wei Xiong

Management plans to fully utilize its existing US$1bn share buyback program before Analyst

expiry (in Mar 2027). We expect such buyback to take place once the Ximalaya wei.xiong@ubs.com

+86-21-3866 8883

acquisition is closed, which implies a ~9% annualised yield. 3) Marketing investment:

S&M rose 36% YoY in 1Q on higher traffic acquisition and content promotion. While Kenneth Fong

TME deepened collaboration with Weixin Video Account to leverage Tencent's traffic Analyst

advantages, we expect S&M spend to remain elevated amid intensified competition. kenneth-kc.fong@ubs.com

+852-3712 3890

Estimate changes: 2Q revenue cut on competition, FY26 largely unchanged Charles Chen

Analyst

We trim 2Q26E online music revenue due to lingering competitive pressure, and social

S1460524020001

revenue to reflect the latest run rate from 1Q, and we now model a 3.5% total revenue

charles-za.chen@ubs.com

growth YoY. We flow in the revenue cut into 2Q26E earnings, partly offset by cost +86-21-3866 8907

discipline. We kept estimates largely unchanged for FY26, awaiting more disclosure to

gauge the financial impact from Ximalaya consolidation.

Valuation: PT unchanged at US$13.0; Neutral

Our DCF-based PT implies 14x 2026E PE, or 1.4x PEG on 10% 2026-28E earnings

CAGR, in line with global streaming peers' 1.5x PEG.