Earning First take: 1Q22 earnings above expectations due to tighter control on SG&A and content costs
- Revenue increased by 1% y-o-y to Rmb28.4bn in 1Q22
- Non-GAAP net profit declined by 10% to Rmb3.9bn, above market expectations due to tighter cost control
- Cloud and AI business remained resilient with 45% revenue growth
- We currently rate BUY with TP of HK$207/US$212
What’s New
– Baidu (9888 HK) announced its 1Q22 results on 26 May after HK market close.
– Revenue increased by 1% y-o-y to Rmb28.4bn in 1Q22, vs. market expectations of -1%-0% growth.
– Baidu core revenue grew 4% to Rmb21bn, with online marketing revenue decreasing by 4% to Rmb15.7bn and non-online marketing (including cloud and AI business) revenue rising 35% to Rmb5.7bn.
– iQiyi revenue decreased 9% to Rmb7.3bn.
– Non-GAAP net profit declined by 10% to Rmb3.9bn, above market expectations, thanks to declining SG&A and content costs. Note that iQiyi recorded non-GAAP net profit of Rmb162m in 1Q22, vs net loss of Rmb1bn in 1Q21.
Our View:
– We expect short term share price support in the near term.
– Online marketing business is sluggish due to macro weakness, and is expected to pick up in 2H22 along with economic recovery. On the other hand, Cloud and AI business remained resilient with revenue increasing by 45% y-o-y in 1Q22.
– iQiyi’s turnaround shows a positive sign of continuous profitability improvement in the long term.
– We currently rate BUY on the counter with TP of HK$207/US$212.