研究报告全文：MN8Feb2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateBaiduBIDUUSCorebusinessrecoveryontrackwithmoretoexpectonnewinitiativesTargetPriceUS19520BaiduscoreadsbusinessisontrackforrecoveryinJanuary2023andweUpDownside364expectsearchadsdemandwillbenefitfromfasterthanexpectedofflineCurrentPriceUS14306activitiesrecoveryin1Q23evidencedbyrobustofflinetravelandcommercetrafficsinceChineseNewYearSearchadsdemandfacedsignificantpressureChinaInternetduetoofflineactivitiesdisruptionsin2022thefasterthanexpectedSaiyiHECFAnormalizationwouldbringsearchadsdemandbacktonormalizedpaceBaidu85239161739hasaccumulatedstrongAItechnologicalcapabilityandwithimprovingcorehesaiyicmbicomhksearchadsbusinessoutlookin2023theprogressinlargescalemonetizationofASDandearlierthanexpectedbreakevenofcloudbusinesswouldserveasYeTAOfranktaocmbicomhksolidfundamentalssupportforitsstockpriceOurSOTPvaluationderivedtargetpriceisUSD1952andwemaintainBUYratingJiSHICFACoreadsbusinessbenefitsmorethanotherplatformsfromoffline85237618728shijicmbicomhkactivitiesrecoveryUnlikeotheronlineadsplatformsBaiduhashigherproportionsofSMEadvertisers80basedonourestimatewhoseWentaoLUdemandwereseverelyimpactedbyofflineactivitiesdisruptionsin2022luwentaocmbicomhkPerMeituanthedailyaverageGTVonitsplatformincreased66duringthefirstsixdaysofSpringFestivalin2023comparedtothatin2019InSophieHUANGadditionthedailyaveragesubwaypassengervolumeinChinas10largesophiehuangcmbicomhkcitiesFig1inthefirstfivedayspost2023CNYholidayhasreachednearlyfullrecoverycomparedtothesameperiodin2019PerWindBothdataEasonXUeasonxucmbicomhkdemonstratedofflineactivitiesrecoverywasfasterthanexpectedwhichindicateBaiduscoreadsbusinessrecoverycouldbefasterthanexpectedStockDatastartingfrom1Q23TherecentsharepricerallyisactuallybackedbyMktCapUSmn508246improvingcoresearchbusinessoutlookfor20234Q22previewreportLinkAvg3mthstoUSmn117152wHighLowUS167357657ChatGPThelpsonsentimentBaiduannounced7FebthatitsChatGPTTotalIssuedSharesmn3553likeproductERNIEBotwillbelaunchedsoonChatGPTsmainSourceFactSetmonetizationwaysincludepremiumsubscriptionmodelandModel-as-a-ShareholdingStructureservicesMaaSwhichcouldhelpbusinessclientstrainmodelsoncloudRobinYanhongLi165enablingclientstoimproveoperatingefficiencyLeadingChineseAICloudSourceHKExcomputingprovidersallcanoffersuchMaaSserviceshencefuturemarketSharePerformanceshareonmonetizingfrombusinessclientswilldependoncapturinghighAbsoluteRelativeworkingefficiencyrequirementindustriesAIcloudcomputingandSaaS1-mth75-54servicesmarketshareThereforeweexpectmaterialrevenuecontribution3-mth679465willstilltaketimebutBaiducertainlyiswellpositionedintermsof6-mth3894SourceFactSettechnologyleadershipinAIbigdataandlargelanguagemodelsandapplications12-mthPricePerformanceMonetizationofnewbusinessiskeyvaluationsupportOurSOTPbasedtargetpriceofUS1952comprises1US591forBaiduCoremainbusinessexcludingApolloandBaiduCloud30oftotaltargetvaluation2US225forApolloASD12oftotal3US404forBaiduCloud21oftotalwhichincludeslargelanguagemodelsfuturerevenuecontributioninMaaS4US603netcash31oftotal5US129foriQIYIandotherinvestments7oftotalRecentstrongstockpricerunSourceFactSethasfairlyreflectedBaiduCorere-ratingtakingintoaccountofnetcashandinvestmentswebelievesharepricesupportcentresonthreeaspectsofBaidusfuturedevelopment1betterthanexpected2023adsdemandrecovery2soonerandgreaterthanexpectedlargescalemonetizationofASDand3earlierthanexpectedbreakevenofcloudbusinessPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk8Feb2023EarningsSummaryYE31DecFY20AFY21AFY22EFY23EFY24ERevenueRMBmn107074124493122527134683144846YoYgrowth03163169975AdjustednetprofitRMBmn220200188300203415220414241927EPSAdjustedRMB63935353572661436676ConsensusEPSRMB63935353555662827100PEx131423585220195ROE12851266668SourceCompanydataBloombergCMBIGMestimatesFigure1Dailyaveragesubwaypassengervolumein10largecitiesmn201920236543210Day1Day2Day3Day4Day5postCNYholidaySourceWindCMBIGMNoteTenlargecitiesincludesBeijingShanghaiGuangzhouShenzhenChengduNanjingWuhanXianSuzhouandZhengzhouFigure2BaiduERNIEmodelFigure3BaidusdigitalhostonKuaishouplatformSourceCompanydataCMBIGMSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE28Feb2023SOTPvaluationofUS1952perADSOurSOTPbasedtargetpriceisUS1952whichcomprisesperADS1US591forBaiduCoremainbusinessexcludingApolloandBaiduCloudmainlyincludingthecoresearchandfeedadsbusinessbasedon70x2023Enon-GAAPPErecoveryinadvertisingbudgetandsentimentcouldcomealongwiththerecoveryinmacroin2023inourviewandBaiduispoisedtodriveitsadsbusinessrevenuebackongrowthtrackaidedbyitsenhancedmobileecosysteminourviewAlsoBaiduhashigherproportionsofSMEadvertisers80basedonourestimateascomparedtootheronlineadsplatformsanddemandfortheseSMEadvertiserswereseverelyimpactedbyofflineactivitiesdisruptionsin2022whichalsolaysfoundationforBaidussearchbusinessrecoveryin2023EWeforecastBaiduCoresadsrevenuetogrow7YoYin2023Efollowinga65YoYdropin20222US225forApolloASDbasedon20x2030Erevenueanddiscountedbackusinga130WACC3US404forBaiduCloudbasedon48x2023EPStherecouldbereratingpotentialforBaiduscloudbusinessif1intheshorttomediumtermYoYgrowthofcloudrevenuerecoversfasterthanexpectedaidedbyrecoveryinmacroandBaidusestablishedcompetitiveedgeinverticalslikesmarttransportationmanufacturingenergyutilitiesandpublicservices2earlierthanexpectedbreakevenforcloudbusiness3developmentofChatGPTisfasterthanexpectedsupportedbyBaidussuperiorAItechnologicalcapabilityThelargelanguagemodelcouldbewidelyappliedtomanyverticalsandindustriesthathavedemandsforintensivecustomerservicesordealingwithstandardizeddemandintheearlystageofapplicationsuchase-commercefinancialservicesandstandardizedproductionHoweverasallleadingChineseAICloudproviderscanoffersuchMaaSservicesthemarketshareforChatGPTrelatedproductsandserviceswillbedeterminedbycloudmarketshareThereforeweexpectmaterialrevenuecontributionwillstilltaketimebutBaiducertainlyiswellpositionedintermsoftechnologyleadershipinAIbigdataandlargelanguagemodelsandapplications4US603netcash5US129foriQIYIandotherinvestmentsOurtargetpricetranslatesinto220202x20232024EPEonnon-GAAPbasisor152140xifexcludingnetcashOverallBaiduremainscommittedtodriveforoperatingefficiencyimprovementCombinedwiththetoplinerecoveryaidedbysolidadsbusinessrecoveryandadditionalrevenuegeneratedfrommonetizationofnewbusinessBaiducoulddeliverbetterthanmarketexpectedoperatingleveragein2023EinourviewFigure4BaiduSOTPvaluationValuationValuationNOPATValuationValuationValuationBaidusofBaidusSegmentUSDADSasofUSmnmethodmultipleRMBmnUSmnstakestaketotalUSmnCorebusinessandcash1Baiducoreex-ApolloandCloud303070x2023EPE146888212111000212115913032ApolloASD559268076100080762251153BaiduCloudex-ASD48x2023EPS100332144881000144884042074Netcash14991121648100021648603309Valuationofcorebusinessandcash654231823934iQIYIandstrategicinvestment1iQIYIMarketvalue3571551575152656742TripcomgroupMarketvalue161032232541082511703UxinMarketvalue816118911100PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE38Feb20234HANDEnterpriseSolutionsMarketvalue788111385360025KuaishouMarketvalue27782240119311246356YusysTechnologiesMarketvalue1526022045111303ValuationofiQIYI6597184andinvestmentsValuationofiQIYIandinvestmentwith461812930holdingdiscount66TotalBaiduvaluation70042USmnNumberofADSoutstandingmn359ValuationperADSUS1952SourceCompanydataCMBIGMestimatesNote1AmericandepositaryshareADSiQIYIIQUSTripcomGroupTCOMUSUxinUXINUSHANDEnterprisesolution300170SHKuaishou1024HKYusysTechnologies300674SHPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE48Feb2023FinancialSummaryINCOMESTATEMENT2019A2020A2021A2022E2023E2024EYE31DecRMBmnRevenue107413107074124493122527134683144846Costofgoodssold628505515864314641016936573620Grossprofit445635191660179584266531871226Operatingexpenses382563757649661433674673349806SGAexpense199101806324723200702168423175RDexpense183461951324938232972504926631Operatingprofit63071434010518150591858521420ShareoflossesprofitsofassociatesJV1254224893216373691AdjustedEBITDA184162750424914284533210935324NetInterestincomeexpense310022552130329727733292Foreignexchangegainloss33660100119600Otherincomeexpense846094031038747000Pre-taxprofit340230901077880532098924711Incometax194840643187257150006309Aftertaxprofit228819026759154821598918403Minorityinterest434534462635293454757Netprofit2057224721022657751553517646Adjustednetprofit181822202018830203422204124193BALANCESHEET2019A2020A2021A2022E2023E2024EYE31DecRMBmnCurrentassets165562183342213315212374240992271126Cashequivalents334433578236850367566310291252Restrictedcash99675810821108211082110821Accountreceivables7416866899819064996310715Othercurrentassets123707138134155663155734157106158339Non-currentassets135754149366166719156168153867151276PPE183111750823027173021633015092Intangibles788784578947412127921439Goodwill182502224822605226052260522605Othernon-currentassets91306101153112140112140112140112140Totalassets301316332708380034368542394859422402Currentliabilities573806838574488731697593078219Short-termborrowings261830164168416841684168Accountpayables327013671641384402834169642858Othercurrentliabilities220612865328936287183006631193Non-currentliabilities711217248081594665046577364220Long-termborrowings7804012629000Bondpayables503876033555772533115258051027Obligationsunderfinanceleases448646935569556955695569Deferredincome1797129129129129Othernon-currentliabilities842773557495749574957495Totalliabilities128501140865156082139673141703142439Sharecapital000000Capitalsurplus387144721347548478834821848553Retainedearnings124885135483163911168493192445218916Otherreserves110931027148714871487148Totalshareholdersequity164708185798218607223524247811274617Minorityinterest810760455345534553455345Totalequityandliabilities301316332708380034368541394859422402PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE58Feb2023CASHFLOW2019A2020A2021A2022E2023E2024EYE31DecRMBmnOperatingProfitbeforetaxation340230901077880532098924711Depreciationamortization191611818016438512649464685Taxpaid194840643187257150006309Changeinworkingcapital66871820718691472489305Others18272520114784718272807384Netcashfromoperations284582420020122173182870430777InvestingCapitalexpenditure6428508410896318025151989Acquisitionofsubsidiariesinvestments9692396247000Netproceedsfromdisposalofshort-term4764860000investmentsOthers121011958620301161130104Netcashfrominvesting199742755231444334126452094FinancingNetborrowings7711239088401262900Sharerepurchases4958130547581000Others3146329221371442288534Netcashfromfinancing387356652339614071288534NetchangeincashCashatthebeginningoftheyear298273443936540476714757773923Exchangedifference1212943000Cashattheendoftheyear3443936540476714757773923102073GROWTH2019A2020A2021A2022E2023E2024EYE31DecRevenue5003163169975Grossprofit1181651592911890Operatingprofit5941274267432234153Netprofit92599255454351690136Adjnetprofit242211145808498PROFITABILITY2019A2020A2021A2022E2023E2024EYE31DecGrossprofitmargin415485483477485492Operatingmargin5913484123138148Adjnetprofitmargin169206151166164167ReturnonequityROE1312851266668GEARINGLIQUIDITYACTIVITIES2019A2020A2021A2022E2023E2024EYE31DecNetdebttoequityx050505050607Currentratiox292729293235Receivableturnoverdays225270270280254257Payableturnoverdays195022652186229321272067VALUATION2019A2020A2021A2022E2023E2024EYE31DecPE1545131423585220195PEdiluted1548132432597224199PB191620151413PCFPS145155479244133122SourceCompanydataCMBIGMestimatesNoteThecalculationofnetcashincludesfinancialassetsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE68Feb2023DisclosuresDisclaimersAnalystCertificationTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportinwholeorinpartcertifiesthatwithrespecttothesecuritiesorissuerthattheanalystcoveredinthisreport1alloftheviewsexpressedaccuratelyreflecthisorherpersonalviewsaboutthesubjectsecuritiesorissuerand2nopartofhisorhercompensationwasisorwillbedirectlyorindirectlyrelatedtothespecificviewsexpressedbythatanalystinthisreportBesidestheanalystconfirmsthatneithertheanalystnorhisherassociatesasdefinedinthecodeofconductissuedbyTheHongKongSecuritiesandFuturesCommission1havedealtinortradedinthestockscoveredinthisresearchreportwithin30calendardayspriortothedateofissueofthisreport2willdealinortradeinthestockscoveredinthisresearchreport3businessdaysafterthedateofissueofthisreport3serveasanofficerofanyoftheHongKonglistedcompaniescoveredinthisreportand4haveanyfinancialinterestsintheHongKonglistedcompaniescoveredinthisreportCMBIGMRatingsBUYStockwithpotentialreturnofover15overnext12monthsHOLDStockwithpotentialreturnof15to-10overnext12monthsSELLStockwithpotentiallossofover10overnext12monthsNOTRATEDStockisnotratedbyCMBIGMOUTPERFORMIndustryexpectedtooutperformtherelevantbroadmarketbenchmarkovernext12monthsMARKET-PERFORMIndustryexpectedtoperformin-linewiththerelevantbroadmarketbenchmarkovernext12monthsUNDERPERFORMIndustryexpectedtounderperformtherelevantbroadmarketbenchmarkovernext12monthsCMBInternationalGlobalMarketsLimitedAddress45FChampionTower3GardenRoadHongKongTel85239000888Fax85239000800CMBInternationalGlobalMarketsLimitedCMBIGMisawhollyownedsubsidiaryofCMBInternationalCapitalCorporationLimitedawhollyownedsubsidiaryofChinaMerchantsBankImportantDisclosuresTherearerisksinvolvedintransactinginanysecuritiesTheinformationcontainedinthisreportmaynotbesuitableforthepurposesofallinvestorsCMBIGMdoesnotprovideindividuallytailoredinvestmentadviceThisreporthasbeenpreparedwithoutregardtotheindividualinvestmentobjectivesfinancialpositionorspecialrequirementsPastperformancehasnoindicationoffutureperformanceandactualeventsmaydiffermateriallyfromthatwhichiscontainedinthereportThevalueofandreturnsfromanyinvestmentsareuncertainandarenotguaranteedandmayfluctuateasaresultoftheirdependenceontheperformanceofunderlyingassetsorothervariablemarketfactorsCMBIGMrecommendsthatinvestorsshouldindependentlyevaluateparticularinvestmentsandstrategiesandencouragesinvestorstoconsultwithaprofessionalfinancialadvisorinordertomaketheirowninvestmentdecisionsThisreportoranyinformationcontainedhereinhavebeenpreparedbytheCMBIGMsolelyforthepurposeofsupplyinginformationtotheclientsofCMBIGMoritsaffiliatestowhomitisdistributedThisreportisnotandshouldnotbeconstruedasanofferorsolicitationtobuyorsellanysecurityoranyinterestinsecuritiesorenterintoanytransactionNeitherCMBIGMnoranyofitsaffiliatesshareholdersagentsconsultantsdirectorsofficersoremployeesshallbeliableforanylossdamageorexpensewhatsoeverwhetherdirectorconsequentialincurredinrelyingontheinformationcontainedinthisreportAnyonemakinguseoftheinformationcontainedinthisreportdoessoentirelyattheirownriskTheinformationandcontentscontainedinthisreportarebasedontheanalysesandinterpretationsofinformationbelievedtobepubliclyavailableandreliableCMBIGMhasexertedeveryeffortinitscapacitytoensurebutnottoguaranteetheiraccuracycompletenesstimelinessorcorrectnessCMBIGMprovidestheinformationadvicesandforecastsonanASISbasisTheinformationandcontentsaresubjecttochangewithoutnoticeCMBIGMmayissueotherpublicationshavinginformationandorconclusionsdifferentfromthisreportThesepublicationsreflectdifferentassumptionpoint-of-viewandanalyticalmethodswhencompilingCMBIGMmaymakeinvestmentdecisionsortakeproprietarypositionsthatareinconsistentwiththerecommendationsorviewsinthisreportCMBIGMmayhaveapositionmakemarketsoractasprincipalorengageintransactionsinsecuritiesofcompaniesreferredtointhisreportforitselfandoronbehalfofitsclientsfromtimetotimeInvestorsshouldassumethatCMBIGMdoesorseekstohaveinvestmentbankingorotherbusinessrelationshipswiththecompaniesinthisreportAsaresultrecipientsshouldbeawarethatCMBIGMmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreportandCMBISwillnotassumeanyresponsibilityinrespectthereofThisreportisfortheuseofintendedrecipientsonlyandthispublicationmaynotbereproducedreprintedsoldredistributedorpublishedinwholeorinpartforanypurposewithoutpriorwrittenconsentofCMBIGMAdditionalinformationonrecommendedsecuritiesisavailableuponrequestForrecipientsofthisdocumentintheUnitedKingdomThisreporthasbeenprovidedonlytopersonsIfallingwithinArticle195oftheFinancialServicesandMarketsAct2000FinancialPromotionOrder2005asamendedfromtimetotimeTheOrderorIIarepersonsfallingwithinArticle492atodHighNetWorthCompaniesUnincorporatedAssociationsetcoftheOrderandmaynotbeprovidedtoanyotherpersonwithoutthepriorwrittenconsentofCMBIGMForrecipientsofthisdocumentintheUnitedStatesCMBIGMisnotaregisteredbroker-dealerintheUnitedStatesAsaresultCMBIGMisnotsubjecttoUSrulesregardingthepreparationofresearchreportsandtheindependenceofresearchanalystsTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportisnotregisteredorqualifiedasaresearchanalystwiththeFinancialIndustryRegulatoryAuthorityFINRATheanalystisnotsubjecttoapplicablerestrictionsunderFINRARulesintendedtoensurethattheanalystisnotaffectedbypotentialconflictsofinterestthatcouldbearuponthereliabilityoftheresearchreportThisreportisintendedfordistributionintheUnitedStatessolelytomajorUSinstitutionalinvestorsasdefinedinRule15a-6undertheUSSecuritiesExchangeActof1934asamendedandmaynotbefurnishedtoanyotherpersonintheUnitedStatesEachmajorUSinstitutionalinvestorthatreceivesacopyofthisreportbyitsacceptancehereofrepresentsandagreesthatitshallnotdistributeorprovidethisreporttoanyotherpersonAnyUSrecipientofthisreportwishingtoeffectanytransactiontobuyorsellsecuritiesbasedontheinformationprovidedinthisreportshoulddosoonlythroughaUS-registeredbroker-dealerForrecipientsofthisdocumentinSingaporeThisreportisdistributedinSingaporebyCMBISingaporePteLimitedCMBISGCompanyRegnNo201731928DanExemptFinancialAdviserasdefinedintheFinancialAdvisersActCap110ofSingaporeandregulatedbytheMonetaryAuthorityofSingaporeCMBISGmaydistributereportsproducedbyitsrespectiveforeignentitiesaffiliatesorotherforeignresearchhousespursuanttoanarrangementunderRegulation32CoftheFinancialAdvisersRegulationsWherethereportisdistributedinSingaporetoapersonwhoisnotanAccreditedInvestorExpertInvestororanInstitutionalInvestorasdefinedintheSecuritiesandFuturesActCap289ofSingaporeCMBISGacceptslegalresponsibilityforthecontentsofthereporttosuchpersonsonlytotheextentrequiredbylawSingaporerecipientsshouldcontactCMBISGat6563504400formattersarisingfromorinconnectionwiththereportPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE7