爱奇艺：Inline 4Q24 results; increase quality content supply to revitalize business growth-20250220

Investment Rating - The report maintains a "BUY" rating for iQIYI, indicating a potential return of over 15% over the next 12 months [19]. Core Insights - iQIYI reported inline 4Q24 results with total revenue declining by 14% YoY to RMB6.61 billion, which aligns with estimates [1]. - Non-GAAP operating income decreased by 56% YoY but increased by 10% QoQ to RMB406 million, slightly above the estimate of RMB395 million [1]. - The management anticipates a recovery in business performance in 1Q25, driven by the launch of several quality drama series [1]. - The target price has been adjusted to US$2.80 based on a 13x FY25E non-GAAP PE, down from the previous target of US$3.00 [1][11]. Financial Performance Summary - FY24 total revenue is projected to decline by 9% YoY to RMB29.2 billion, with a non-GAAP operating margin down by 3.8 percentage points YoY to 8.1% due to operating deleverage and content investment [1]. - Membership services revenue decreased by 15% YoY to RMB4.10 billion in 4Q24, primarily due to a weak content slate in the preceding months [8]. - Online advertising revenue fell by 13% YoY to RMB1.43 billion, mainly due to a decline in brand advertising revenue [8]. - The forecast for total revenue in 1Q25 is expected to grow by 7% QoQ but decline by 11% YoY to RMB7.07 billion [8]. Revenue and Profitability Forecasts - The revenue forecast for FY25 has been lowered by 4-7% due to a slower-than-expected recovery pace [1]. - Non-GAAP net profit for FY25 is estimated at RMB1.5 billion, reflecting a decrease of 14.5% from previous estimates [9]. - The gross margin is expected to improve from 24.9% in 2024 to 25.0% in 2025, while the non-GAAP operating margin is projected to rise from 8.1% in 2024 to 8.6% in 2025 [9]. Share Performance and Market Data - The current market capitalization of iQIYI is approximately US$2.22 billion, with a current price of US$2.31 and a target price of US$2.80, indicating an upside potential of 21.5% [3]. - The stock has shown a 1-month absolute performance of 18.8% and a 3-month performance of 10.3% [5].