20210813-招银国际-Prudent_ads_outlook_in_2H21E_5页_892kb

Baidu (BIDU US) Company Update Summary

Core Content

This report provides an analysis of Baidu's financial performance and outlook for the second quarter of 2021 (2Q21E) and beyond. It outlines the company's revenue and earnings performance, key financial metrics, and valuation updates. The report also includes insights into Baidu's strategic initiatives and the overall market sentiment.

Key Financial Performance

• 2Q21E Revenue: RMB31.4bn, up 20% YoY, 1% above consensus.
• Non-GAAP EPS: RMB59.8, up 5% YoY, 18% above consensus.
• Margin Improvements: Non-GAAP OPM for Baidu Core improved to 27%, surpassing the estimate of 25%.
• 3Q21E Revenue Guidance: RMB30.6-33.5bn, with a midpoint 3% below consensus due to a cautious outlook on advertising revenue.

Revenue Breakdown

• Online Marketing Services:
  • 2Q21E: RMB20,828m, up 18% YoY.
  • 3Q21E Guidance: RMB20,950m, with a 5% growth rate.
• Other Services:
  • 2Q21E: RMB10,522m, up 26% YoY.
  • 3Q21E Guidance: RMB10,522m, with a 5% growth rate.

Strategic Developments

• AI Cloud: Revenue accelerated to 71% YoY growth, significantly above industrial growth.
• Robotaxi: Baidu aims to cover more than 30 cities in 2-3 years, with a projected 20% cost reduction by 2025. The cost per mile declined by 60% from the fourth to fifth generation.
• Investment and Competition: Increased investment and rising competition are expected to dampen the auto segment's valuation.

Earnings and Valuation Adjustments

• Earnings Revision:
  • FY21E: Revenue cut by 6%, Adj. net profit cut by 5.6%.
  • FY22E: Revenue cut by 9%, Adj. net profit cut by 8.7%.
  • FY23E: Revenue cut by 9%, Adj. net profit cut by 8.6%.
• Target Price: Revised to US$248.0 from US$335.8.
• Current Price: US$160.5.
• 12-Month Price Performance: Down 55% from the previous target price.

Financial Ratios and Metrics

• P/E Ratio:
  • FY21E: 17.3x
  • FY22E: 14.4x
  • FY23E: 12.3x
• P/B Ratio:
  • FY21E: 16.9x
  • FY22E: 15.3x
  • FY23E: 13.8x
• Net Margin:
  • FY21E: 15.2%
  • FY22E: 15.6%
  • FY23E: 16.0%
• Tax Rate:
  • FY21E: 22.0%
  • FY22E: 24.0%
  • FY23E: 24.0%

Shareholding and Stock Data

• Market Cap: US$58,886m
• Average 3-Month Turnover: US$927.38m
• 52-Week High/Low: US$354.8/US$115.6
• Total Issued Shares: 284mn
• Shareholding Structure:
  • BlackRock: 4.61%
  • Vanguard: 3.47%
  • PRIMECAP Management: 3.33%

Share Performance

• 1-Month: -8.2%
• 3-Month: -13.1%
• 6-Month: -43.6%
• 12-Month: -46.8%

SOTP Valuation

• Equity Value: US$86bn
• Target Price (SOTP-based): US$248.3
• Valuation Methodology:
  • Core search + news feed: EV/EBIT, 11.4x (FY21E)
  • Cloud: EV/Sales, 6.7x (FY21E)
  • Apollo: EV/Sales, 7.0x (FY21E)
  • iQiyi: Mkt cap
  • Ctrip: Mkt cap
  • Net Debt/Cash: US$19.1bn

Analyst Recommendations

• Rating: BUY (Maintain)
• Reasoning: Despite conservative guidance and margin dilution from non-ads business, Baidu's long-term growth potential in AI Cloud and Robotaxi is positive. However, near-term valuation is affected by cautious advertising sentiment and regulatory pressures.

Key Risks and Outlook

• Ads Outlook: Cautious due to travel restrictions and tightening regulations in entertainment, education, and gaming sectors.
• Valuation Risks: Stepping-up investment and competition may temporarily dampen auto valuation.
• Catalysts: Limited near-term catalysts, but long-term growth in AI Cloud and Robotaxi is anticipated.

Disclosures

• Analyst Certification: The analyst certifies that the views expressed accurately reflect personal opinions and that no compensation is directly or indirectly related to the report's content.
• Conflict of Interest: CMBIS may have investment banking relationships with the companies mentioned, which could affect the report's objectivity.
• Disclaimer: The report is for informational purposes only and not an offer to buy or sell securities. It is not tailored to individual investors and should not be relied upon without professional advice.

CMBIS Ratings

• BUY: Potential return of over 15% over the next 12 months.
• HOLD: Potential return of +15% to -10%.
• SELL: Potential loss of over 10%.
• NOT RATED: Not rated by CMBIS.

Legal and Distribution Notes

• United Kingdom: Report is only for persons within Article 19(5) or Article 49(2) of the Financial Services and Markets Act 2000.
• United States: Not a registered broker-dealer; only for "major US institutional investors".
• Singapore: Distributed by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser, and subject to Singapore regulations.