Investment Rating - The report maintains a Buy rating for iQIYI (IQ US) with a target price of 1.86 [1][3] Core Views - The target price is based on a 10x 2025 P/E ratio, adjusted from the previous 2.60 due to content supply stability recovery [1] - Membership is expected to gradually bottom out and rebound in 2025, leading to marginal financial improvements [1] - The current valuation is near historical lows at 6.6x 2025 P/E, making it an attractive investment opportunity [1] - The company's micro-drama layout is progressing steadily, with potential contributions to commercial growth [1] Financial Model Updates - Revenue forecasts for 2024E, 2025E, and 2026E are adjusted to RMB 29,222 million, RMB 28,914 million, and RMB 31,233 million, respectively, with minor downward revisions [2] - Gross profit margins are expected to remain stable at 25% in 2024E and 2025E, increasing to 27% in 2026E [2] - Adjusted operating profit for 2024E is revised upward to RMB 2,353 million, while 2025E and 2026E forecasts are slightly lowered [2] - Adjusted net profit for 2024E is reduced by 12% to RMB 1,494 million, with further downward revisions for 2025E and 2026E [2] Performance Outlook - Q4 2024 revenue is expected to decline by 14% YoY to RMB 6,610 million, with membership revenue under pressure, declining 15% YoY [5][6] - Advertising revenue is projected to grow 7% QoQ in Q4 2024, driven by popular dramas like I Am a Police Officer [5] - Adjusted operating profit for Q4 2024 is revised upward to RMB 397 million, despite pressure from exchange rate losses [5] Industry and Peer Comparison - iQIYI is categorized under the entertainment content sub-sector, alongside peers like Bilibili (BILI US) and Tencent Music (TME US) [12] - The report covers multiple companies in the internet and education sectors, with Buy ratings for most, including Baidu (BIDU US) and Pinduoduo (PDD US) [12] Financial Ratios and Metrics - Gross margin is expected to improve from 24.9% in 2024E to 26.6% in 2026E [16] - ROE is forecasted to increase from 5.5% in 2024E to 11.8% in 2026E, reflecting improved profitability [16] - Net debt-to-equity ratio is projected to decrease significantly from 62.2% in 2024E to 13.7% in 2026E [16]
爱奇艺：长剧供给逐步改善，微短剧布局稳步推进