Youdao(US:DAO)2024-05-08 02:32Investment Rating - The report maintains a "Buy" rating for the company, with a target price adjusted from $5.30 to $5.10, indicating a potential upside of 42.1% from the current price of $3.59 [1][2][9]. Core Insights - The company is expected to achieve revenue growth of 16% year-on-year in Q1 2024, reaching 1.35 billion RMB, aligning with previous expectations and slightly above market forecasts [1]. - The adjusted net loss for Q1 2024 is projected to be 46 million RMB, significantly better than prior expectations of 97 million RMB and market estimates of 87 million RMB, indicating improved business health and a continued decline in marketing expenses as a percentage of revenue [1][2]. - The strategic focus is on reducing losses while emphasizing growth in high school and advertising segments, with expectations of a 25%-30% growth in high school business for the year [2]. - The introduction of the updated large model "ZiYue" 2.0 and new hardware products is anticipated to enhance product competitiveness and long-term commercialization potential [2]. Financial Summary - Revenue is projected to grow from 5,013 million RMB in 2022 to 6,177 million RMB in 2024, reflecting a compound annual growth rate (CAGR) of approximately 14.6% [3][10]. - The company is expected to reach breakeven in adjusted net profit by 2024, with a forecasted net profit of 2 million RMB, transitioning from a net loss of 640 million RMB in 2022 [3][10]. - The gross profit margin is expected to stabilize around 49% in 2024, with operational efficiency improving as the company scales its high school business [3][10].