Baidu Inc is a Chinese language Internet search provider. The company offers a Chinese language search platform on its Baidu.com Website that enables users to find information online, including Webpages, news, images, documents and multimedia files, through links provided on its Website. The Company operates through two segments, Baidu Core segment and iQIYI segment. Baidu Core mainly provides search-based, feed-based, and other online marketing services, as well as products and services from the Company’s new artificial intelligence (AI) initiatives. Within Baidu Core, the Company’s product and services offerings are categorized as Mobile Ecosystem, Baidu AI Cloud and Intelligent Driving & Other Growth Initiatives. iQIYI is an online entertainment service provider that offers original, professionally produced and partner-generated content on its platform.
Bullish market sentiment for Chinese technology companies resumes. Among the big tech companies, Baidu has the cheapest valuation as its respective TTM and FY21 PER was 9.4x and 17.7x.
The company recently had multiple positive catalysts, including stepping into EV market with a joint development with Geely Auto (175 HK), spinning off an independent artificial intelligence chip unit Kunlun with a valuation of RMB13bn, and launching VR 2.0. Baidu, compared to other big tech companies, has less exposure to the anti-trust regulations as its technology applications are mainly supporting services to various sectors.
Market consensus of net profit growth in FY21 and FY22 are -2.0% YoY and 16.8% YoY, which implies forward PERs of 20.9x and 17.9x. Current PER is 24.1x. Bloomberg consensus average 12-month target price is HK$308.7.