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Baidu Inc 09888

Morningstar Rating
HKD 88.85 −1.60 (1.77%)
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Company Report

Baidu Earnings: Weakness in Advertising Offset by Continued Double-Digit Growth in Cloud Business

We keep our fair value estimate for Baidu at USD 174, or HKD 171 per share after it posted first-quarter revenue of CNY 31.1 billion that was in line with our estimate. Core Baidu advertising revenue increased only 3% year on year, underscoring continued weakness in China’s macroeconomy. Advertising headwinds were offset by 12% year-on-year growth for the cloud artificial intelligence business, which should remain a bright spot for Baidu as revenue should continue to rise in the midteens year on year next quarter. Baidu remains highly confident that its generative AI model will be a long-term earnings driver, as it is seeing demand from the application side. Clients are now diversified beyond the industrial and infrastructure sectors, and there is greater demand from domestic internet platforms throughout various industries. Baidu said generative AI revenue was about CNY 1 billion this quarter, of which, CNY 322 million came from AI cloud.

Price vs Fair Value

09888 is trading at a 38% premium.
Price
HKD 88.85
Fair Value
HKD 377.00
Uncertainty
High
1-Star Price
HKD 746.44
5-Star Price
HKD 634.80
Economic Moat
Jztn
Capital Allocation
Rjjzcppg

Bulls Say, Bears Say

Bulls

Baidu is strengthening its mobile ecosystem with search, livestreaming, and mini programs, helping to create a closed-loop experience for users to acquire information and make transaction.

Bears

Alibaba, Tencent, ByteDance, Kuaishou and other social media platforms are competing in terms of advertising budgets, which will result in slow growth in revenue for Baidu search.

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News

Trading Information

Previous Close Price
HKD 90.45
Day Range
HKD 88.4591.10
52-Week Range
HKD 87.80155.80
Bid/Ask
HKD 88.80 / HKD 88.85
Market Cap
HKD 249.24 Bil
Volume/Avg
5.2 Mil / 8.8 Mil

Key Statistics

Price/Earnings (Normalized)
7.67
Price/Sales
1.70
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
0.58%

Company Profile

Baidu is the largest internet search engine in China with 84% share of the search engine market in September 2021 per web analytics firm, Statcounter. The firm generated 72% of core revenue from online marketing services from its search engine in 2022. Outside its search engine, Baidu is a technology-driven company and its other major growth initiatives are artificial intelligence cloud, video streaming services, voice recognition technology, and autonomous driving.
Sector
Communication Services
Industry
Internet Content & Information
Stock Style Box
Large Value
Total Number of Employees
45,500

Competitors

Valuation

Metric
09888
03690
00700
Price/Earnings (Normalized)
7.6729.3621.15
Price/Book Value
0.914.473.90
Price/Sales
1.702.475.53
Price/Cash Flow
6.2125.7917.60
Price/Earnings
09888
03690
00700

Financial Strength

Metric
09888
03690
00700
Quick Ratio
2.471.571.30
Current Ratio
2.791.821.47
Interest Coverage
6.0410.2713.41
Quick Ratio
09888
03690
00700

Profitability

Metric
09888
03690
00700
Return on Assets (Normalized)
7.36%8.68%10.08%
Return on Equity (Normalized)
12.52%16.49%20.37%
Return on Invested Capital (Normalized)
7.40%11.89%12.97%
Return on Assets
09888
03690
00700
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