iQIYI(US:IQ) GF SECURITIES·2024-03-06 16:00Investment Rating - The report maintains a "Buy" rating for iQIYI, with a target price of $8.03 per ADS, reflecting a 15x PE valuation for 2024 [4][26]. Core Insights - iQIYI's Q4 2023 revenue reached 77.06 billion RMB, showing a year-over-year increase of 1% but a quarter-over-quarter decrease of 4%, slightly above consensus expectations [2][8]. - The company achieved double-digit growth in both membership and advertising revenues for 2023, with membership revenue at 48.09 billion RMB in Q4, and advertising revenue at 16.51 billion RMB [2][11]. - The average revenue per member (ARM) increased to 15.98 RMB/month, marking a 13% year-over-year growth [2][11]. - The adjusted net profit for Q4 was 6.82 billion RMB, exceeding expectations by 29% [2][8]. Financial Performance Summary - Q4 2023 gross margin was 28.2%, with operating profit at 7.74 billion RMB, reflecting a year-over-year decrease of 1% but a quarter-over-quarter increase of 4% [2][8]. - The company expects revenues of 338 billion RMB and 376 billion RMB for 2024 and 2025, respectively, with growth rates of 6% and 11% [2][24]. - Adjusted net profits for 2024 and 2025 are projected to be 36.9 billion RMB and 44.1 billion RMB [2][24]. Revenue Breakdown - Membership revenue accounted for 62% of total revenue in Q4 2023, while advertising revenue made up 21% [11][12]. - The company anticipates membership revenue to grow to 212 billion RMB and 244 billion RMB in 2024 and 2025, respectively [24][25]. - Advertising revenue is expected to reach 67 billion RMB and 69 billion RMB in 2024 and 2025, with growth rates of 8% and 3% [24][25]. Cost Management - Content costs for Q4 2023 were 37 billion RMB, down 5% year-over-year, indicating effective cost control measures [2][20]. - The company continues to focus on original content production, which has helped optimize content costs and improve return on investment [20][26].