Caitong Securities released a research report stating that TME-SW (01698) is expanding as a music platform company with leading advantages. The firm projects total revenues of RMB 32.4/36.5/40.5 billion for 2025-2027, with net profits attributable to shareholders of RMB 10.7/10.4/12.3 billion, corresponding to P/E ratios of 24.11x, 24.89x, and 21.04x respectively. This marks the first coverage with an "Overweight" rating. Key highlights include:

**Market Leadership in Domestic Music Industry** TME-SW holds approximately 67% of China's paid music user share in 2024, boasting over 260 million licensed and co-created music/audio tracks. Its platforms (QQ Music, KuGou, Kuwo) collectively serve over 800 million MAUs, maintaining dominance in content and user scale.

**Three Growth Pillars Driving Platform Transformation** 1) **Online Music Subscription**: Core revenue driver with steady growth in paying users (up 6.3% YoY to 124 million in Q2 2025) and ARPU (up 9.3% YoY to RMB 11.7). 2) **Social Entertainment**: Emerging growth via TME Live (80+ concerts), SM Entertainment IP collaborations, and fan economy features like "Bubble." 3) **B2B SaaS**: Cross-industry integration (film/TV, smart vehicles) through TME Studio’s end-to-end music services.

**AI Reshapes Music Value Chain** - **Creation**: "Morning Star" AI tool generates 5,000+ daily tracks at 1/10th manual cost (per Sina News). - **Distribution**: Algorithms boost cold-start efficiency; average daily usage rebounded to 96 minutes in 2024. - **Consumption**: Paid users grew as recommendation-driven plays rose, with song collections up 10% YoY. AI also enhances ad engagement, fueling revenue growth.