3q25预告：加大优质内容投资

3Q25 preview: increasing investment in qualitycontent Target PriceUS$2.70Up/Downside26.2%Current PriceUS$2.14 WeforecastiQiyi’stotal revenue to be flattish QoQ butretreatby 8% YoY toRMB6.64bn in 3Q25E,with a resilient membership business (+3% QoQ)supported by the quality content pipeline. Weestimatenon-GAAP operatinglossof RMB23mn in 3Q25E,vs operating income of RMB369/59mn in3Q24/2Q25, mainly due totheadjustment to certain non-corebusinessesandstep-up of content investment during summer peak season.Overall,wemaintain FY25-27Erevenue forecast largelyunchanged,but lower non-GAAPoperating income forecastby 0.4-2%to factor in the increase in contentinvestment. We maintainour target priceofUS$2.70 based on 18x2026E non-GAAPPE. Maintain BUY,as we expectNRTA’s supportive policy and micro-dramainvestmentwill graduallybear fruitin2026. China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Ye TAO, CFAfranktao@cmbi.com.hk Membership business to recover QoQ; advertisingbusinessremainsunder pressure.By segment: 1) we estimatemembership revenue todeclineby 3% YoY, but grow by 3% QoQ to RMB4.2bn in 3Q25E, mainlyattributable to the better content performance in 3Q25 vs. 2Q25. Severalquality dramas were launched in 3Q25,includingZhaoXueLu,This ThrivingLandandCalming Wave;2) we forecast online advertising revenue todecrease by 8%/3% YoY/QoQ to RMB1.2bn in 3Q25E, with decline in bothbrand andperformance-based ads,primarilydue to the lack of varietyshows and major marketing events; 3) we forecast content distributionrevenue togrowby47% QoQto RMB640mnin3Q25E,mainlythanks tothe increase in distribution revenue from cable TV and the revenue sharingfrommovieThe Shadow's Edge. JoannaMa(852) 3761 8838joannama@cmbi.com.hk Stock Data Focus on investing in quality content; AI update.The companyreleasedover 400 content pieces covering long & micro dramas, variety shows andmovies on the 2025 iJOY conference, including highlyanticipateddramaslikeStrange Tales of Tang Dynasty3,Born to be Alive,Family PropertyandvarietyshowslikeThe Blooming Journey2andThe Rap of China2026.Interms of content strategy, iQiyi will continue to invest in quality long-formand short-form content to satisfy various user demand. Thecompanyalsoleverages AI to improve contentproductionefficiencyand introduced iQiyiAI Theatre,whichwillrecruitAI movie talentswith aplantolaunchthe firstAIGC movie in 1Q26. Stepping up contentinvestment.iQiyisteppedup content investment insummer to capture greater market share, whilemaintainingdisciplined opexcontrol.We expect GPM/non-GAAP OPM to decline by 1.6ppts/1.2pptsto18.5%/-0.3% in 3Q25E, mainly due to the higher content investment andadjustment of certainbusinesslines. Source: FactSet Business forecasts update and valuation Valuation We valueiQiyiat US$2.70per share based on18x2026E non-GAAP EPS.Our target PEmultiple isat adiscountto thesector average (30x), dueto the intense competition inChina’s video streaming sector. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsiblefor the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/herassociates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line withthe relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly ownedsubsidiary of China Merc