This report does not constitute a rating action. Overview Key strengths Key risks Highly strategic subsidiary of Tencent Holdings Ltd. Stringent regulatory oversight over social entertainment platforms. Largest online music entertainment platform in China. Stiff competition from other entertainment platforms for users and screentime. Minimal leverage with healthy cash flow, especially from the stable music subscription business. We estimate the company's music subscription revenue will increase by about 15% and EBITDA by over 20% in 2025. This follows already substantial growth in 2024. Key contributing factors include a fast increase in music subscriptions and low incremental costs. TME?s music label contracts include fixed minimum royalty costs and smaller variable costs. This creates operating leverage as the company?s subscription base grows.
