not vested
Baidu Inc: On a diet
Baidu Inc’s (Baidu) 2Q19 results came in above expectations.
Revenue rose 1% YoY to RMB 26.3b, or 2% above consensus.
Non-GAAP operating profit fell 70% YoY, which was better than the street’s expectations due to a more modest SG&A increase, which we believe to be down to better cost control.
All in, non-GAAP PATMI came in at RMB 3.6b, or 78% above consensus.
Management remains upbeat on Baidu’s Smart Mini Program ecosystem, which they believe will generate significant ROI for customers.
Management was also sanguine about new entrants entering the search market, given the barriers to entry.
Management expects cost of revenue and opex to remain stable QoQ, which points to continued cost control against a backdrop of subdued revenue growth.
We continue to believe that the headwinds from the group’s health care initiative, macro uncertainties and softness from iQIYI’s advertising contribution could cap the upside on Baidu’s share price, following the post-results relief rally.
We derive a FV of US$113, based on our SOTP approach. HOLD.
Source: OCBC