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Investing.com - HSBC has initiated coverage on NetEase Cloud Music Inc (HK:9899) with a Hold rating and a price target of HK$275.00.
The Hong Kong-listed music streaming platform has seen its share price surge 140% year to date, outperforming competitor TME’s 110% gain and the KWEB index’s 43% increase, according to HSBC analyst Jessie Lu.
HSBC’s analysis suggests that in a blue-sky scenario, NetEase Music’s subscription revenue could potentially grow 188% from its 2024 level, with gross profit margin expanding by 11 percentage points.
This optimistic projection would translate to approximately 30% revenue compound annual growth rate over four years, compared to the past three years’ CAGR of 24% for NetEase Music and 28% for TME.
HSBC considers this growth target unrealistic, noting that NetEase Music’s app similarities to TME’s offering will limit its pricing power, while the current valuation at 17x PE under the blue-sky scenario already reflects a fair valuation in line with the internet sector’s trading average.
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