CICC: Maintains "Outperform" rating on Doushi (DAO.US), target price of USD6.0
1min read Zhitong Finance learned that recently, CICC released a research report to deeply analyze the performance of Youdao (DAO.US) in Q3 2024 and its future development trend, and gave an expected guidance. CICC maintained its "outperform industry" rating for Youdao and raised its target price by 30% to US$6.00, corresponding to 0.8 times the 2025 revenue multiple. CICC believes that Youdao is trading at 0.7 times the 2025 revenue multiple, with a 23% upside.
The report pointed out that Youdao's Q3 performance exceeded market expectations, with revenue up 2.2% YoY to Rmb1.57bn, and its non-GAAP attributable net profit reached Rmb88.66mn, achieving a significant improvement from the same period last year.
The report emphasized that Youdao's advertising business maintained high growth, especially its online marketing services business, which exceeded expectations, with revenue up 45.6% YoY, mainly driven by the growth of RTA and KOL advertising demand. Considering the more optimistic growth prospect of the advertising business, the advertising business's PE was raised from 5 times to 13 times, corresponding to 0.8 times the 2025 revenue multiple.
In the smart hardware field, Youdao also performed well, with Q3 revenue reaching Rmb315mn, up 25.2% YoY. This growth was mainly driven by the launch and market performance of the new X series of Youdao's electronic dictionary pens. In terms of learning services, although revenue declined 19.2% YoY, the Company said it was due to its focus on high ROI customer acquisition channels and a relatively cautious advertising strategy during the summer.
CICC mentioned that Youdao recorded an operating profit of Rmb107mn, corresponding to an operating margin of 6.8%, achieving its first operating profit in Q3. It is expected that the Company will achieve positive operating profit in the whole year of 2024.
In addition, well-known brokerage Huatai Securities and Jerreries both made comments on Youdao's Q3 performance and gave a "buy" rating, with target prices set at US$5.92 and US$6.20 respectively. As of the close of trading on November 19, Youdao's stock price was US$5.10.
