FAST NEWS: Tencent Music’s profit climbs on paying user growth

The Latest: Tencent Music Entertainment Group (TME.US; 1698.HK) on Tuesday announced its second-quarter net profit rose 29.6% year-on-year to 1.68 billion yuan ($231 million).

Looking Up: The company’s profit rose even as its revenue fell, mainly due to a 13.3% decline in its cost of revenues and a 10.2% reduction in its general and administrative expenses.

Take Note: The company’s revenues decreased by 1.7% to 7.16 billion yuan, mainly due to a 42.8% plunge in revenues from social entertainment services, partially offset by a 27.7% increase in revenue from online music services.

Digging Deeper: Tencent Music is China’s leading online music services provider, formed by the merger of China Music Corp. and Tencent’s (0700.HK) own digital music business in 2016. It listed in New York and Hong Kong in 2018 and 2022, respectively. The company previously flagged its social entertainment services as a growth engine, but that business has begun to slip in recent years. However, its online music services has performed better. In the last quarter, for example, its number of paying online music users increased by 17.7% to 117 million, and its average revenue per paying user also rose by 10.3% to 10.7 yuan.

Market Reaction: Tencent Music’s Hong Kong shares fell on Wednesday, closing down 17.1% at HK$44.35 by the midday break. It currently trades in the middle of its 52-week range.

Translation by A. Au

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