This report does not constitute a rating action. Moderating topline growth: A maturing music market and ramp up of non-paying options by competitors will remain headwinds for Tencent Music. The company is navigating this situation by growing average revenue per existing paying user that seeks higher quality audio output. We project subscription revenue will grow 5%-8% annually, in line with industry growth rate. Limited Ximalaya contribution: Regulatory restrictions on price hikes and other business practices will limit near-term monetization benefits from Tencent Music's acquisition of Ximalaya in May 2026. We expect the annualized revenue gain at less than 10% for 2026 and 2027. Meanwhile, the acquisition expands Tencent Music's content offerings, allowing cross-selling and creating greater user stickiness. This helps
