Deutsche Bank: Downgraded Tencent Music's target price to HKD 57, reiterating a "Buy" rating.

Deutsche Bank released a report indicating that Tencent Music's performance in the second quarter generally met expectations, with revenue increasing by 6% year-on-year and adjusted net profit rising by 4% year-on-year. Music-related revenue grew by 11%, showing signs of stabilization driven by the consolidation of Himalaya, growth in Super VIP subscriptions, and strong momentum in IP-related services. However, gross margin decreased both quarter-on-quarter and year-on-year, mainly due to a shift in revenue structure toward lower-margin IP-related businesses. The bank has raised its revenue forecast for Tencent Music for the fiscal years 2026 and 2027 by 2%/2%, but has lowered its adjusted net profit forecast by 2%/3% due to the deterioration in profit margins. As a result, the long-term free cash flow forecast has been downgraded, and the target price has been adjusted from HKD 66 to HKD 57, while maintaining a "buy" rating and continuing to have a positive outlook on the companys leading position in the online music and audio streaming sector.