20210219-招银国际-From_Search_to_Auto_5页_892kb

Baidu (BIDU US) Company Update Summary

Core Content Overview

This report provides an update on Baidu's financial performance and strategic initiatives, highlighting its transition from a search leader to an emerging leader in the autonomous driving and AI cloud sectors. The report outlines the company's 4Q20 results, future guidance, and valuation outlook, along with key financial metrics and analyst ratings.

Financial Performance

4Q20 Results

• Revenue: RMB30.3 billion, up 4% YoY, 1% above consensus.
• Non-GAAP EPS: RMB20.08, down 24% YoY, 18% above consensus.
• Baidu Core Non-GAAP OPM: 35%, improved due to optimized TAC and disciplined cost control.

1Q21E Guidance

• Revenue: RMB26–28.5 billion, up 15–26% YoY, with midpoint 5% above consensus.
• Non-ads business growth: Expected to grow at 26–39% YoY, significantly above previous estimates.

Revenue Growth (YoY)

• FY19A to FY23E: Revenue is projected to grow from RMB107,413 million to RMB166,170 million, with a compound annual growth rate (CAGR) of 17.5%.

Profitability

• Adj. net profit: Expected to increase from RMB22,020 million (FY20A) to RMB34,339 million (FY23E).
• Adj. EPS: Projected to rise from RMB63.9 (FY20A) to RMB99.7 (FY23E).
• Gross margin: Expected to increase from 48.2% (FY21E) to 52.9% (FY23E).
• Operating margin: Projected to rise from 11.2% (FY21E) to 13.9% (FY23E).
• Net margin: Expected to increase from 18.8% (FY21E) to 20.7% (FY23E).

Strategic Initiatives

Auto Division Progress

• EV Production: Collaborating with Geely to develop autonomous vehicles, with a 3-year production plan before launching new models.
• ASD Tech Enhancements: Advancing Apollo Self Driving (ASD) with features like AVP (Automated Valet Parking), ANP (Autonomous Navigation Pilot), and HD Maps.
• Smart Transportation Expansion: Expanding into more cities after the Guangzhou Phase I project, including Beijing and Shanghai.
• Monetization Potential: Baidu's auto unit is expected to enhance monetization visibility and unlock valuation potential, with a non-ads TAM estimated at 10x that of ads.

Ads Recovery

• 4Q20 Ads Growth: Increased by 6% YoY, compared to 2% in 3Q20.
• 1Q21E Ads Guidance: Expected to grow at 26–39% YoY, with rising contributions from non-ads business (Cloud, hardware, and AI), which grew by 52% YoY.
• Ads Momentum: Continued strong recovery, with high visibility for further rebound in expanding verticals.

Valuation and Target Price

• Equity Value: Estimated at US$130 billion (FY21E), with a SOTP-based target price of US$377.8 (up from US$173).
• Valuation Methodology:
  • Core search + news feed: EV/EBIT multiple of 14.8x (FY21E).
  • Cloud: EV/Sales multiple of 10.6x (FY21E).
  • Apollo: EV/Sales multiple of 14.0x (FY21E).
• P/E Ratio: Projected to decrease from 32.2x (FY19A) to 19.8x (FY23E).
• P/B Ratio: Expected to decline from 40.1x (FY19A) to 25.1x (FY23E).

Analyst Ratings and Outlook

• CMBIS Rating: BUY, with a target price of US$377.8 (up 26.8% from current price of US$298.0).
• Reasoning: Reflects the potential of the auto TAM and improved ads outlook, with revenue estimates raised by 4% in FY21E and 10% in FY22E.

Shareholding and Stock Data

• Market Cap: US$111,259 million.
• Average 3-Month Turnover: US$1,913.66 million.
• 52-Week High/Low: US$326.5 / US$82.0.
• Total Issued Shares: 270 million.
• Top Shareholders:
  • BlackRock: 4.7%
  • PRIMECAP Management: 3.5%
  • Vanguard Group: 3.5%

Share Performance

• 1-Month Return: 36.6% absolute, 26.4% relative.
• 3-Month Return: 120.6% absolute, 87.3% relative.
• 6-Month Return: 179.4% absolute, 119.2% relative.

Key Ratios

• Sales Mix:
  • Online marketing: 71.3% (FY21E) to 70.2% (FY23E).
  • Other services: 28.7% (FY21E) to 29.8% (FY23E).
• P&L Ratios:
  • Gross margin: 48.2% (FY21E) to 52.9% (FY23E).
  • Pre-tax margin: 21.0% (FY21E) to 22.5% (FY23E).
  • Net margin: 17.2% (FY21E) to 18.5% (FY23E).
• Balance Sheet Ratios:
  • Current ratio: 2.9 (FY19A) to 3.5 (FY23E).
  • ROE: 13.1% (FY19A) to 12.7% (FY23E).
  • ROA: 5.7% (FY19A) to 7.6% (FY23E).

Analyst Certification and Disclosures

• Analyst Certification: The analyst certifies that all views reflect personal opinions and that no compensation is tied to specific views.
• Disclosure: The analyst confirms no trading activity in the stock within 30 days prior to the report and no trading for 3 business days after.
• CMBIS Ratings:
  • BUY: Over 15% return over next 12 months.
  • HOLD: Return between +15% to -10% over next 12 months.
  • SELL: Over 10% loss over next 12 months.
  • NOT RATED: Not rated by CMBIS.
  • OUTPERFORM: Industry expected to outperform the market.
  • MARKET-PERFORM: Industry expected to perform in-line with the market.
  • UNDERPERFORM: Industry expected to underperform the market.

Legal and Regulatory Information

• CMBIS: A subsidiary of China Merchants Bank, located at 45/F, Champion Tower, 3 Garden Road, Hong Kong.
• Important Disclosures:
  • The report is for informational purposes only and not investment advice.
  • CMBIS does not assume liability for reliance on the report.
  • Information is subject to change without notice.
  • CMBIS may have conflicts of interest and is not responsible for any resulting impact.
• Distribution Restrictions:
  • United Kingdom: Only for persons within Article 19(5) of the Financial Services and Markets Act 2000.
  • United States: Intended solely for "major US institutional investors" and not for distribution to others.
  • Singapore: Distributed by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser, and regulated by the Monetary Authority of Singapore.

Summary of Key Points

• Baidu delivered strong 4Q20 results with revenue and non-GAAP EPS growth.
• The company is transitioning from a search leader to an auto and AI cloud leader.
• Auto initiatives, including EV production and ASD technology, are expected to unlock new monetization opportunities.
• Ads recovery is accelerating, with non-ads business showing significant growth.
• The target price has been raised to US$377.8, reflecting improved outlook and valuation potential.
• Analysts maintain a BUY rating, citing strong performance and strategic shifts.
• The report includes detailed financial summaries, including income statements, cash flow, and balance sheets.
• CMBIS provides the information "as is" and does not assume responsibility for its use.