Investment Rating - The report maintains a Buy rating for iQIYI (IQ US) with a target price of USD 3.80, implying a potential upside of 57.7% from the current price of USD 2.41 [1][4] Core Views - 3Q24 Preview: The report expects iQIYI's 3Q24 revenue and adjusted operating profit to remain largely unchanged at RMB 7.2 billion and RMB 350 million, respectively, representing a YoY decline of 10% and 61% due to pressure on membership and brand advertising revenue [1] - Adjusted Net Profit: The adjusted net profit for 3Q24 is revised upward to RMB 450 million (vs Bloomberg consensus of RMB 120 million), driven by foreign exchange gains from RMB appreciation, with an adjusted net margin of 6% [1] - Membership and Advertising Pressure: Membership revenue is expected to decline 13% YoY and 3% QoQ in 3Q24, while advertising revenue is projected to drop 21% YoY to RMB 1.3 billion due to budget cuts in FMCG and other industries [1] - Content Strategy Upgrade: iQIYI is focusing on a "long + short" premium content strategy, introducing "Short Theater" (5-20 minutes) and "Micro Theater" (1-5 minutes) to enhance member engagement and diversify content offerings [2] - Valuation: The report maintains the 2024 revenue forecast and slightly adjusts the 2025 net profit forecast, valuing iQIYI at 10x 2025 P/E and reiterating the target price of USD 3.80 [2] Financial Data Summary - Revenue: Expected to decline 5.6% YoY to RMB 30.1 billion in 2024E, with a recovery to 5.2% YoY growth in 2025E [3] - Net Profit: Forecasted at RMB 1.88 billion in 2024E, a 33.9% YoY decline, but expected to rebound to 40.5% YoY growth in 2025E [3] - EPS: Adjusted EPS for 2024E is revised upward by 16.3% to RMB 1.92, while 2025E EPS is slightly adjusted downward by 2.2% to RMB 2.70 [3] - P/E Ratio: Stands at 8.9x for 2024E and 6.3x for 2025E, indicating an attractive valuation [3] Market Performance - Share Price Performance: iQIYI's share price has declined 50.61% YTD, underperforming the MSCI China Index [4] - Market Cap: As of the report date, iQIYI's market cap is USD 1.27 billion [4] Content and Market Share - Drama Market Share: iQIYI's drama share in the TOP20 rankings improved to 37% in 3Q24, up from 20% in 1H24, driven by better-performing series [1][5] - Variety Show Market Share: iQIYI ranked 3rd in variety shows, with a stable share compared to 1H24 [1][5] Membership and ARM Trends - Membership: Paid members are expected to decline 3% QoQ to 43.68 million in 3Q24, with a 13% YoY drop in membership revenue [7] - ARM (Average Revenue per Member): ARM growth remains under pressure, with a projected 3% QoQ decline in 3Q24 [5][7]
爱奇艺：3季度预览：会员及品牌广告承压，汇兑收益或带动利润超此前预期