By Tracy Qu


Tencent Music Entertainment shares rose sharply after quarterly earnings beat expectations, helped by strong growth in paid subscriptions.

Shares were 8.6% higher at 59.55 Hong Kong dollars (US$7.62) on Tuesday in Hong Kong, following an 11% gain overnight in U.S.-listed American depositary receipts.

The subsidiary of Chinese social media and gaming company Tencent on Monday posted a 24% year-over-year rise in first-quarter profit and a 3.4% drop in revenue, beating FactSet estimates in both cases. Gross profit margin rose to 41% from 33% a year ago, helped by strong revenue growth from music subscriptions and advertising services, while its number of paying users rose 20% from a year earlier, Tencent Music said.

Citi analysts led by Alicia Yap saw the solid first-quarter results beat as "stronger-than-expected," especially with the quarterly music subscriber net add and improved gross profit margin. The analysts keep a buy rating on the stock with a target price of US$13.00.

Daiwa analysts led by Candis Chan and John Choi said in a research note that they like "TME's earnings growth driven by its online music subscription." They now expect online music's gross margin to reach 45% in 2026, lifting their 2024-2026 gross margin estimates by 1.7-2.0 percentage point. Daiwa keeps a buy rating and raised its target price to HK$60.00 from HK$49.00.


Write to Tracy Qu at tracy.qu@wsj.com


(END) Dow Jones Newswires

05-13-24 2357ET