【行业研究报告】爱奇艺-Mild recovery with better margin ahead

Despitemacrouncertainty,wekeeppositiveoniQIYI’slong-termsubstrendand
marginimprovement,backedbyitsuniqueoriginalcontentandvaluableIP.
4Q22Ewouldbeasolidquarter,withrisingsubsandgradualadsrecovery
(supportedbyhitdramasNewLifeBegins<卿卿日常>andseveralwell-
anticipatedtitles).Weexpectpositiveprofittocontinueahead,withdisciplined
ROI-driveninvestment.StockshouldreactpositiveifCBfinancialpressure(in
Apr2023)torelieve.WeforecastiQIYItodeliver6%/91topline/bottomlineCAGR
duringFY22-24E.ResumewithBUYwithDCF-basedTPatUS$4.1.
Strongcontentpipelinetosupportsubsmomentum.iQIYIexceleditself
withexclusiveoriginalcontentinbothpopulardramasandvarietyshows.It
withexclusiveoriginalcontentinbothpopulardramasandvarietyshows.It
borefruitsfromrecentdramas(e.g.thepopularityofLovebetweenfairyand
devil<苍兰诀>),whichboosteditssubsupto101mn(netaddsof10.6mn)
in3Q22.Weexpectsubssequentialgrowthtocontinuein4Q22E,backed
byrichpipeline(e.g.WildBloom<风吹半夏>、UnchainedLove<浮图缘>).
ItscostumedramaNewLifeBegins<卿卿日常>(launchedon10Nov)
outperformedwith35%shareintermsofaggregateviews(Top1,basedon
Enlightentdata),furthersupporting4Q22Erecovery.Weexpectitssubsrev
+10%/+8%YoYin4Q22/FY23E,withramp-upofbothsubsandARM.ARM
shouldseeupsidefrom:1)risingTVmembers(withhigherprice);and2)
diverse&premiumcontenttodrivestrongermonetization.
Expectadsrecoveryin4Q22E&1Q23E,whileconsistentrebound
needsmoretime.Givenchallengingmacroandcompetition,adswouldstill
bearshort-termpressure.However,weexpectadssequentialgrowthahead
in4Q22E(forecasting+6%QoQ,-21%YoY),withrichercontenttorelease
andenrichedadsformats.Lookingahead,weexpectitsadsrevtodeliver
lowsingledigitYoYgrowthinFY23/24E.
Continuousmarginimprovementwithcostdiscipline.Weseehigh
visibilityforiQIYItoimproveitsprofitabilityinthelongrun,foraggressive
costcontrol,pricehikeandoperatingleverage.Mgmt.hasupgradedits
priorityonmarginexpansionwith“calmgrowth”,focusingoncorebizand
higher-ROIprojects.WeexpectiQIYItoachievenon-GAAPOPMat9%in
FY24E(non-GAAPOPatRMB2.9bn),withGPMupto25%.
MaintainBUY.WesetourDCF-basedTPatUS$4.1(implying0.8xFY23E
P/S,21.6xFY23EP/E),belowindustryaverageof2.3xFY23EP/S.Waiting
formorecatalystsfrom:1)hitdramastobelaunched;and2)CBdealto
close.