not vested
Baidu Inc (BIDU US / 9888 HK) - Good underlying momentum
Baidu’s 1Q21 results came in above expectations.
Non-GAAP net income grew 39% YoY to RMB4.3b or RMB12.38 in terms diluted earnings per ADS, which came in 16% above consensus.
Baidu is guiding for 2Q21 revenue to come in between RMB29.7b – RMB32.5b, or 14%-25% YoY, with the midpoint of RMB31.1b being 3% higher than consensus.
Baidu’s AI Cloud grew 55% YoY in 1Q21 (67% YoY in 4Q20), which management attributes to a high base in 1Q20, and believes that it will be able to grow at a rate higher than that moving forward based on its pipeline.
Smart transportation also remains a significant opportunity given the network effect it creates as Baidu makes inroads into more cities.
On intelligent driving, despite the EV scene becoming more crowded, management remains confident on Jidu Auto’s prospects and opines that it will possess the best user experience and price-to-performance ratio when launched, given its years of investment in autonomous driving.
On the advertising side, we note that most of Baidu’s top ad verticals performed well with CPM up double-digits.
Management did highlight that given the ramp of 2B (e.g. AI Cloud) and 2G (e.g. smart transportation) businesses, overall margins would get impacted, given the relatively slower growth but higher margin business in the mobile ecosystem search and feed.
Taking this into account and following adjustments, we reduce our FV from USD355 to USD319 (BIDU US) / HKD344 to HKD309 (9888 HK). BUY.
Source: OCBC