Shares of Tencent Music Entertainment Group
surged in Hong Kong on Wednesday after the Chinese company posted a 43% rise in third-quarter profit.
Tencent Music shares jumped 26% to 22.10 Hong Kong dollars (US$2.83), hitting their highest levels since listing in the city almost two months ago by way of introduction. The upturn tracked Tencent Music’s American depositary receipts, which gained 31%.
Tencent Music, which operates an online music and audio entertainment platform, on Tuesday posted a net profit of 1.06 billion yuan (US$150.5 million) for the quarter ended Sept. 30, despite revenue falling 5.6% to CNY7.37 billion.
The Shenzhen-based company said quarterly gross margin increased to 32.6% from 29.6% a year earlier, mainly due to “effective control of content costs,” improved efficiencies and its advertising services bringing in more revenue.
Its gross margin is set to grow further and cost control efforts look solid, analysts at U.S. investment bank Jefferies said in a note. “In 2023, we expect earnings to grow faster than revenue” on a year-over-year basis, they said.