Open Source Securities: Maintain NetEase Cloud Music (09899) "Buy" rating, optimistic about high-quality content driving ARPU to gradually increase

CryptoTimes Financial APP has learned that Kaiyuan Securities issued a research report maintaining a “Buy” rating for NetEase Cloud Music (09899). The current stock price corresponds to PE ratios of 15.0/13.4/11.9 times, with optimistic prospects for ARPU growth driven by high-quality content. The company is expected to achieve revenue of 7.76 billion yuan in 2025, with net profit attributable to shareholders of 2.75 billion yuan (year-over-year +76.0%), adjusted operating profit of 1.73 billion yuan (year-over-year +32.4%), and adjusted net profit of 2.86 billion yuan (year-over-year +68.2%). The high growth is mainly due to improved profitability and approximately 680 million yuan in income tax credits recognized in 2025.

Kaiyuan Securities’ main views are as follows:

Performance

In 2025, the company is projected to reach revenue of 7.76 billion yuan, with net profit attributable to shareholders of 2.75 billion yuan (up 76.0% YoY), adjusted operating profit of 1.73 billion yuan (up 32.4% YoY), and adjusted net profit of 2.86 billion yuan (up 68.2% YoY). The significant growth is primarily driven by enhanced profitability and the recognition of about 680 million yuan in income tax credits in 2025. In the second half of the year, the company is expected to generate revenue of 3.93 billion yuan (up 1.4% YoY), net profit attributable to shareholders of 860 million yuan (up 14.8% YoY), adjusted operating profit of 830 million yuan (up 29.7% YoY), and adjusted net profit of 910 million yuan (up 11.5% YoY). In 2025, gross margin is forecasted at 35.7% (up 2 percentage points YoY), with H2 gross margin at 35.0% (up 3 percentage points YoY). The improvement is mainly due to increased operating leverage and efficiency in music services, while the quarter-over-quarter decline may be attributed to a higher proportion of social entertainment revenue in H2, leading to increased sharing costs.

Steady Growth in Music Service Revenue and Strengthening Platform Brand Recognition

The company continues to focus on online music services, with expected revenue of 5.99 billion yuan in 2025 (up 12% YoY). This growth is driven by upgrades to membership benefits and enriched community content, which sustain growth in monthly paying users. Membership services are projected to generate 5.05 billion yuan in revenue (up 13% YoY). The platform’s brand recognition is further reinforced. Despite reducing promotional investments in 2025 (sales expense ratio down 2.4 percentage points YoY), both user scale and activity levels have increased YoY. Additionally, DAU/MAU ratios and daily active usage on mobile devices have improved, reflecting stronger user engagement.

Continued Expansion of Audio Content, AI Empowerment to Enhance User Experience, and Accelerated Platform Commercialization

The company is actively building a diverse and differentiated content ecosystem by supplementing licensed music libraries and strengthening its leading independent musician ecosystem. It launched “Original Voice Director” to establish a “discovery-appreciation-distribution” mechanism, providing exposure opportunities for high-quality content through popular variety shows like “Singer 2025” and games like “Fantasy Westward Journey.” By the end of 2025, the platform has over one million registered independent musicians (over 819,000 registered as of June 2025) and more than 5.6 million uploaded tracks (about 4.8 million as of June 2025). The platform continues to expand audio content, with podcasts like Guo Degang’s supernatural stories “Zi Bu Yu Wo Yu” approaching 10 million listens. Its self-developed large model Climber enhances content recommendation capabilities, and AI features support one-click MV generation and background customization for players. The firm believes that ongoing expansion of audio content and deepening AI applications will continue to drive active user growth, increase paying rates, and boost ARPU.

Risk Warning: User growth and payment rate improvements may fall short of expectations, and intensified industry competition could pose risks.