Morgan Stanley launches investment report today

The following is a summary of the contents of the report:

Ultra-expected performance: The second quarter of 2013 fiscal year, Qihoo revenue of 152 million U.S. dollars, an increase of 110%, compared with the guidance of the expected upper limit of 6%. Net profit of 33 million U.S. dollars, an increase of 370%. Higher than our expected $21 million trillion, mainly thanks to operating leverage.

Positive factors: 1 advertising revenue rose 78% year-on-year. We estimate that search advertising revenue of about 15 million U.S. dollars, the chain growth of 150%. Game revenue grew about 150% Year-on-year. 2 The total number of users for the month is 461 million, an increase of 8%. Mobile security users for 338 million, an increase of 180%. Month browser users, day navigation page users and click Traffic increased 21% to 60% year-on-year. 3 Our data show that the first half of this year's search revenue of Qihoo is less than 1% of Baidu revenue, meaning a larger space for development. 4) Qihoo is expected to increase sales by 19% to 21% in the third quarter, up 115% to 118% year-on-year. 5 Operating profit margin of 24%, the chain increase of 18%, increased by 11%.

Negative factors: 1 on the basis of non-US general accounting standards, operating profit margin in the third quarter or fall by 6% to 7%, mainly by the one-time marketing activities dragged down.

Search traffic continued to grow: 1 based on page traffic (PV), Qihoo July Search traffic market share of 16%, higher than a quarter before 14%. and Baidu market share from 71% to 68%. 2 based on more than 400 million PC security products users, Qihoo has launched a more accessible Desktop Search service (press the CTRL key two times). 3 We expect the Qihoo application store to contribute about 10% of its revenue in the second quarter.

Valuation: We continue to maintain the "overweight" rating of Qihoo 360, raising the target share price from $70 to $80.40.