Caitong Securities released a research report stating that TME-SW (01698) maintains a leading position in China's music market with strong user stickiness. The firm forecasts the company's 2025-2027 revenue at RMB 32.40/36.49/40.52 billion and net profit attributable to shareholders at RMB 10.73/10.40/12.30 billion, corresponding to a PE ratio of 22.48x, 23.20x, and 19.61x, respectively. It reiterated an "Overweight" rating.

Key highlights from Caitong Securities: In Q3 2025, TME-SW reported total revenue of RMB 8.46 billion, up 20.6% YoY, driven by strong growth in online music services. Operating profit rose 26.4% YoY to RMB 2.71 billion, while net profit reached RMB 2.15 billion.

**Content Ecosystem Expansion & Service Diversification Boost Online Music Performance** Online music service revenue surged 27.2% YoY to RMB 6.97 billion. Average revenue per music subscription user climbed to RMB 11.9/month, up 10.19% YoY, supported by enhanced super membership benefits and growing paying users. Beyond subscriptions, offline concerts, advertising, and artist merchandise became key revenue drivers. In Q3, all tickets for 14 offline concerts sold out, attracting over 150,000 attendees, while the Tencent Music Entertainment Awards featured 35 artists and drew over 10,000 spectators.

**Innovative Membership System Enhances User Experience & Stickiness** TME-SW introduced liquid glass skins and a player fully compatible with HarmonyOS, alongside AI-powered song-switching features, significantly improving visual and interactive experiences. The appeal of ad-supported memberships to free users continued to rise, driving increased daily platform engagement and ad revenue growth.

**Risk Factors:** Tightening industry regulations, competitive pressures in differentiated products, slower-than-expected AI development, and macroeconomic headwinds.