爱奇艺：4Q25E preview: expect both revenue and earnings to recover in 4Q25-20260122

Investment Rating - The report maintains a "BUY" rating for iQIYI, indicating a potential return of over 15% over the next 12 months [16]. Core Insights - iQIYI is expected to see a recovery in both revenue and earnings in 4Q25, with total revenue projected to grow by 2% year-over-year (YoY) and 1% quarter-over-quarter (QoQ) to RMB6.77 billion, driven by the recovery of membership and content distribution businesses [1][8]. - The forecast for non-GAAP net income in 4Q25 is RMB93 million, a significant improvement from the non-GAAP net losses recorded in previous quarters [1]. - The target price for iQIYI has been adjusted to US$2.75, based on an 18x multiple of the 2026E non-GAAP EPS, reflecting a 36.8% upside from the current price of US$2.01 [3][11]. Financial Performance Summary - Revenue for FY23A was RMB32,018 million, with a YoY growth of 10.4%. However, FY24A revenue is expected to decline by 8.7% to RMB29,225 million, followed by a further decline of 6.7% in FY25E to RMB27,263 million [2]. - The adjusted net profit for FY23A was RMB2,984.1 million, which is expected to drop to RMB1,512.2 million in FY24A and further to RMB264.1 million in FY25E [2]. - Gross margin is projected to decrease from 27.8% in FY23A to 20.9% in FY25E, before recovering to 23.3% in FY26E and 24.2% in FY27E [2]. Business Forecasts and Valuation - iQIYI's revenue for FY25E is forecasted at RMB27.3 billion, with a slight increase in FY26E to RMB27.9 billion and FY27E to RMB28.4 billion [9]. - The non-GAAP net profit is expected to significantly improve from RMB0.3 billion in FY25E to RMB1.0 billion in FY26E and RMB1.3 billion in FY27E, reflecting a recovery trend [9]. - The valuation of iQIYI is based on a target PE multiple of 18x for 2026E non-GAAP EPS, which is at a discount to the sector average of 24x due to intense competition in the video streaming sector [11].