Maintain Qihoo 360 stock overweight (overweight) rating

The following is a summary of the report:

We were surprised by the strong revenue growth in the first quarter of fiscal year 2014 and the rapid development of mobile commercialization. We expect that the two main growth drivers for mobile and search will continue to grow strongly over the next four quarters, and that the profit margin structure will gradually change as a result of acquisitions and investments. We are optimistic that Qihoo 360 further improves the commercialization efficiency of PC and mobile traffic. Maintain an "overweight" rating.

Performance exceeding expectations. Qihoo 360 earnings per share of the first quarter of NON-GAAP (non-US GAAP) is 0.54 USD, 75% and 54% higher than we expected and analysts ' average estimates respectively. Despite the decline in gross profit margins, earnings per share exceeded expectations because of higher revenue than expected and lower research and development costs. Revenue for the first quarter was 15% higher than we expected, and the median revenue guidance forecast for the second quarter was 8% higher than our previous forecast.

Mobile and search commercialization drive growth. Qihoo 360 in the first quarter of the total mobile business revenue of 58 million U.S. dollars, mainly from mobile game revenue growth (the total of 38 million U.S. dollars, the chain doubled). With strong channels and solid executive power, we still expect Qihoo 360 's mobile gaming revenue to exceed the overall market trend. The first quarter of the search revenue reached 41 million U.S. dollars, accounting for about 15% of total revenue. We expect the search revenue growth to accelerate in the second half of fiscal year 2014.

The acquisition of MEDIAV will improve the commercial efficiency of PC advertising. We believe that MEDIAV's large data analysis will enable advertisers to target audiences more accurately, which naturally can bring synergy to the commercialization of Qihoo 360. While short-term margins are under pressure, we expect synergies to play out in fiscal year 2014.

Maintain an "overweight" rating and raise its December 2014 target share price to $170 trillion. Our target stock price base is: The 2015 fiscal year NON-GAAP per share ads (US depository shares) earnings of 4.06 U.S. dollars, 2015-2017 per share ads revenue composite annual growth rate of 42%,peg (P/E ratio of relative profit growth) is 1 times times.