iQIYI(US:IQ) Zhao Yin Guo Ji·2024-07-29 06:22Investment Rating - The report assigns a "Buy" rating for the company, iQIYI, with a target price of $6.40, reflecting a potential upside of 104.5% from the current price of $3.13 [2][8]. Core Insights - iQIYI is expected to face short-term headwinds in Q2 2024, with total revenue projected to decline by 5% year-over-year to RMB 7.4 billion due to underperformance of certain shows and a decrease in the number of variety shows [2]. - Non-GAAP operating profit is anticipated to drop by 36% year-over-year to RMB 503 million, despite content costs and operating expenses remaining stable [2]. - The company is expected to gradually recover in the second half of 2024, driven by a strong pipeline of quality content [2]. - Membership revenue is projected to decline by 8% year-over-year to RMB 4.5 billion in Q2 2024, primarily due to the underperformance of certain shows and loss of market share to competitors [2]. - Advertising revenue is expected to decrease by 4% year-over-year to RMB 1.4 billion in Q2 2024, influenced by a reduction in variety shows compared to the previous year [2]. Financial Summary - For FY24E, total revenue is projected at RMB 31.0 billion, with a year-over-year growth rate of -2.6% [5][6]. - Non-GAAP net profit is forecasted at RMB 2.8 billion for FY24E, reflecting a slight decrease of 0.4% year-over-year [5][6]. - The gross profit margin is expected to improve to 28.2% in FY24E, while the non-GAAP operating profit margin is projected to be 10.4% [6][7]. Valuation - The target price of $6.40 is based on a 16x PE multiple for FY24E, which is lower than the industry average of 25x due to intense competition in the Chinese video streaming sector [8][10].