20220831-招银国际-The_worst_is_behind__eyes_on_2H22E_recovery_4页_878kb

Baidu (BIDU US) Company Update Summary

Core Content Overview

This document provides an equity research update on Baidu (BIDU US) by CMB International Global Markets, highlighting the company's performance in 2Q22, future outlook, and financial metrics. The report suggests a BUY rating with a target price of US$203.0, indicating a potential +47.3% return from the current price of US$137.8.

Main Points and Key Information

2Q22 Financial Performance

• Revenue: -5% YoY, 1% above consensus, 2% above CMBIG estimate.
• Non-GAAP Net Profit: +3% YoY, 61% above consensus.
• Core Adj. OPM: 22%, higher than the CMBIG estimate of 16%.
• Total Online Marketing Revenue: -12% YoY, better than the estimated -16%.
• Core Ads Revenue: -10% YoY, better than feared.
• IQ's Ad Revenue: -35% YoY, largely in line with expectations.

2H22E Outlook

• Ads Recovery: Expected to recover in 3Q22E with core ads at -3% YoY (vs. -10% in 2Q22), driven by improved spending in e-commerce, medical service, and travel sectors.
• AI Cloud: Forecasted to grow at +33% YoY in 3Q22E, with a potential acceleration in 2H22E due to less travel restrictions.
• Auto Business: Demonstrating progress in scaling operations, with the potential to deliver more affordable parts.
• ACE Transportation: Expected to achieve breakeven earlier than other verticals (by 4Q22E).

Key Financial Forecasts

• Revenue (FY22-24E): Raised by 19-28% compared to previous estimates.
• Adj. Net Profit (FY22-24E): Increased to 22,624 RMB mn (FY23E) and 26,767 RMB mn (FY24E).
• Adj. EPS (FY22-24E): Forecasted at 64.5 RMB (FY23E) and 75.6 RMB (FY24E).
• P/E Ratio: 22x for FY23E, with a target price of US$203.

Financial Highlights

• Gross Margin: Expected to increase from 49.6% to 51.5% in FY23E.
• Operating Margin: Projected to rise from 16.1% to 17.2% in FY23E.
• Net Margin: Anticipated to increase from 18.7% to 19.8% in FY24E.

Earnings Summary (YE 31 Dec)

• Revenue (RMB mn): FY20A: 106,360, FY21A: 123,635, FY22E: 126,739, FY23E: 142,944, FY24E: 159,984.
• Adj. Net Profit (RMB mn): FY20A: 18,312, FY21A: 6,733, FY22E: 7,357, FY23E: 13,480, FY24E: 17,203.

Cash Flow and Balance Sheet

• Operating Cash Flow: Expected to rise from 19,925 RMB mn (FY22E) to 37,479 RMB mn (FY24E).
• Cash (end of year): Projected to increase from 48,566 RMB mn (FY23E) to 84,258 RMB mn (FY24E).
• Total Equity: Forecasted to increase from 239,834 RMB mn (FY22E) to 290,425 RMB mn (FY24E).

Key Ratios

• Sales Mix: Online marketing is expected to decrease from 60.6% (FY22E) to 51.7% (FY24E), while other services will increase from 39.4% (FY22E) to 48.3% (FY24E).
• ROE: Projected to rise from 8.3% (FY22E) to 9.4% (FY24E).
• ROA: Expected to increase from 5.1% (FY22E) to 6.1% (FY24E).

Analyst Ratings and Recommendations

• CMBIGM Rating: BUY, suggesting a potential return of over 15% over the next 12 months.
• Analyst Certification: The analyst certifies that the views expressed in the report reflect personal opinions and that there are no conflicts of interest.
• Disclosure: The report is not investment advice and is for informational purposes only. Investors are advised to consult professional financial advisors.

Risk and Disclaimer

• Market Risks: The report highlights the risks involved in trading securities and the potential for actual events to differ from expectations.
• Confidentiality: The report is for the intended recipients only and may not be reproduced or distributed without prior consent.
• Legal Disclaimer: CMBIGM and its affiliates are not liable for any loss or damage arising from reliance on the information provided.

Additional Information

• Company Overview: Baidu is a leading Chinese internet company with operations in online marketing, AI cloud, and autonomous driving.
• Shareholding Structure: Primecap Management holds 3.5%, Doge & Cox BlackRock Inc holds 2.4%, and BlackRock Inc holds 1.4%.
• Stock Data: Market Cap is US$51,041 mn, with a 12-month price performance chart included.

This summary provides a concise overview of Baidu's recent performance, future outlook, and key financial metrics as outlined in the report.