After the US stock market on August 10, Tencent Music (TME.US) will release its financial report for the second quarter of 2020. Bloomberg's consistent market forecast shows that in Q2 2020, Tencent Music's revenue will reach 6.871 billion yuan, up 16% year on year; adjusted net profit will be 1.102 billion yuan, down 2.4% year on year.

Looking back at the previous quarter, Tencent Music's revenue increased 10% year over year to 6.31 billion yuan, in line with market expectations; net profit was 887 million yuan, higher than market expectations of 828 million yuan.

Among Tencent Music's two businesses, the online music business performed well in Q1. Revenue increased 27% year over year to 2,044 billion yuan, accounting for 32% of total revenue. This is mainly because there are more and more music paying users. In Q1, the number of paying users increased by 50% over the same period last year to 42.7 million, and the user payment conversion rate increased to 6.5%.

However, in the social entertainment business, which has always been comprised of TME's important revenue until now, the Q1 revenue growth rate has slowed. This is mainly because the pandemic in the first quarter of this year affected users' willingness to give live streaming rewards.

At the current quarter's earnings conference, management predicted that in the second quarter, the revenue growth rate of the online music and social entertainment business would be better than the first quarter. In terms of online music, although the resumption of users will reduce the time spent on music consumption, as the scale of paid songs expands, the number of paying users of the platform and music subscription revenue will continue to grow steadily.

In terms of social entertainment, the company already saw a recovery in rewards revenue in April and May. At the same time, the company is also making long-term investments, such as the launch of the new Changlong Audio App Cool Me Listen, QQ Music Live, and the entertainment brand TME Live. According to Tencent Music, as of August of this year, TME Live has hosted 15 shows, attracting over 100 million viewers, and the amount of interaction on social platforms is also impressive.

In this context, the capital market is paying close attention to the recovery and new developments of Tencent Music's two businesses after the pandemic, including whether its music membership revenue will continue to grow rapidly, details of copyright updates with major global record companies, and the performance of its various new live streaming businesses.

Bloomberg Intelligence analysts believe that Tencent Music may accelerate the growth rate of paying users of its online music service in the second quarter, mainly due to the increase in online time and the switch to payment for more songs during the pandemic. In the social entertainment business, as the epidemic recedes and users' willingness to reward live streaming has gradually recovered, their revenue is likely to improve in the future.

Huaxing Capital mentioned in a report that, overall, institutions are confident in the growth of TME's paid users, mainly due to the increase in the number of paid songs and the impact of long-term audio membership subscriptions in the later stages. Meanwhile, the social entertainment business will also return to the right track to a large extent. On the one hand, it will be due to the easing of the epidemic and the resumption of the anchor business; on the other hand, it will be driven by QQ Music's introduction of a live streaming function.

As of August 10, out of 26 analysts tracked by Bloomberg, 20 gave Tencent Music a “buy” rating, 6 had a “hold” rating, and no “sell” rating.