Maintain Qihoo 360 stock holdings Rating

In the first quarter of the fiscal year 2014, Qihoo 360 revenue for 265 million U.S. dollars, the chain growth of 19%, year-on-year growth of 144%. 16% higher than we expected, reaching the company's guiding expectations, thanks largely to the robust performance of search and mobile commercialization. Based on non-US general accounting standards, operating profit of 59.5 million U.S. dollars, an increase of 217%. Operating margins were 22.5%, up from 17.1% a year earlier. Based on non-US general accounting standards, net profit of 73 million U.S. dollars, an increase of 319%. Diluted earnings per share of $0.37 trillion, above Wall Street's expected $0.34 trillion.

Search commercialization went well: first-quarter search revenue was $40 million, accounting for 15% of total revenue, up from $6 million a year earlier and $38 million in the previous quarter. The authoritative flow statistics agency CNZZ data show that by the end of March, Qihoo's search market share was about 25% (based on independent user visits), up from 200 to 300 basis points compared to the previous quarter. Qihoo Management said it attracted some 65,000 advertisers in the first quarter, compared with about 50,000 in the previous financial year and is expected to attract about 100,000 in the next 6 months. On average, qihoo costs about 25% of Baidu per click.

Mobile revenue growth: The first financial Tichi total mobile revenue of 58 million U.S. dollars, including about 38 million U.S. dollars in mobile game revenue and 20 million U.S. dollars in mobile advertising revenue. Qihoo says it will soon launch a local mobile search application. In addition, Qihoo plans to integrate search dialogs into app stores and mobile browsers to improve mobile search usage and commercialization. The first quarter, the game revenue of 106 million U.S. dollars, the chain growth of 68%, the number of players reached about 1 million, higher than the previous quarter of about 700,000.

Second-quarter results expected: Qihoo forecast that the second quarter revenue will reach 300 million U.S. dollars to 350 million U.S. dollars, the chain growth of 13% to 15%, year-on-year growth of 98% to 101%, higher than Wall Street expected 270 million dollars. But Qihoo also pointed out that the second quarter will continue to invest in areas such as marketing and research and development, which could affect margins in the short term.

Valuation: We continue to maintain the "overweight" rating of Qihoo 360 stocks.