Open source securities: maintain a "buy" rating on NETEASE MUSIC (09899) and expect the gradual increase of ARPU driven by high-quality content.

Open source securities published a research report stating that it maintains a "buy" rating on NETEASE MUSIC (09899), with current stock prices corresponding to PE ratios of 15.0/13.4/11.9 times, and is optimistic about the gradual increase in ARPU driven by high-quality content. The company's revenue in 2025 is expected to reach 7.76 billion yuan, with a net profit attributable to owners of 2.75 billion yuan (a year-on-year increase of 76.0%), an adjusted operating profit of 1.73 billion yuan (a year-on-year increase of 32.4%), and an adjusted net profit of 2.86 billion yuan (a year-on-year increase of 68.2%). The significant increase in performance is mainly attributed to the improvement in profitability and the recognition of tax deductions of approximately 680 million yuan in 2025. The main points of view of open source securities are as follows: Performance The company is expected to achieve revenue of 7.76 billion yuan in 2025, with a net profit attributable to owners of 2.75 billion yuan (a year-on-year increase of 76.0%), an adjusted operating profit of 1.73 billion yuan (a year-on-year increase of 32.4%), and an adjusted net profit of 2.86 billion yuan (a year-on-year increase of 68.2%). The increase in performance is mainly attributed to the improvement in profitability and the recognition of tax deductions of approximately 680 million yuan in 2025. In the second half of the year, the company achieved revenue of 3.93 billion yuan (a year-on-year increase of 1.4%), with a net profit attributable to owners of 860 million yuan (a year-on-year increase of 14.8%), an adjusted operating profit of 830 million yuan (a year-on-year increase of 29.7%), and an adjusted net profit of 910 million yuan (a year-on-year increase of 11.5%). The gross profit margin in 2025 is 35.7% (up 2 percentage points year-on-year), with a gross profit margin of 35.0% in the second half of the year (up 3 percentage points year-on-year). The year-on-year increase is mainly due to the enhanced operating leverage and efficiency improvement of the music service, while the quarter-on-quarter decrease is due to the increase in the proportion of social entertainment revenue driving an increase in revenue sharing. Steady growth in music service revenue, further strengthening platform brand awareness The company continues to focus on online music services, achieving revenue of 5.99 billion yuan in 2025 (a year-on-year increase of 12%), mainly driven by the continuous growth of monthly paid users through the enhancement of member rights and enriched community content, with member service revenue reaching 5.05 billion yuan (a year-on-year increase of 13%). The platform brand awareness is further strengthened, with user scale and engagement both achieving year-on-year growth in 2025, while DAU/MAU, mobile user daily usage time also increased year-on-year, reflecting increased user stickiness. Continuously expanding audio content, AI empowering user experience, optimistic about accelerating platform commercialization The company continues to build a diverse and differentiated content ecosystem, supplementing copyright music reserves on one hand and continuing to strengthen the leading independent music ecosystem on the other, launching "Original Sound Push Officer" to establish a "exploration-appreciation-dissemination" mechanism, providing exposure opportunities for quality content in high-traffic variety shows and games such as "Singer 2025" and "Dream Journey". By the end of 2025, the platform had registered over a million independent musicians (with over 819,000 registered in 2025.6) and uploaded over 5.6 million tracks (with approximately 4.8 million tracks in 2025.6). The platform continues to expand audio content, with comedian Guo Degang's supernatural story-themed podcast "ZIBUYU My Language" receiving nearly ten million listens. The self-developed large model Climber enhances content recommendation capabilities, and a series of AI functions help realize one-click MV generation, player background customization, and more. The bank is optimistic about the continued growth of active users, payment rates, and ARPU driven by the expansion of audio content and deepening AI applications. Risk Warning: Unexpected growth in user scale and payment rates, intensified industry competition, etc.