Baidu, Inc.  

Key Positives:  

Total Revenue (RMB 31,921 million in Q3 FY21 vs RMB 28,232 million in Q3 FY20), Cash and Cash Equivalents (RMB 40,701 million as of September 30, 2021, vs RMB 6,317 million as of September 30 2020) 

Key Negatives: 

Technology Risk, Cyber and Security Risks, Operating Income (RMB 4,708 in Q3 FY21 vs RMB 7,636 in Q3 FY20) 

Baidu, Inc. (NASDAQ: BIDU) is China's Internet search engine, with an 84% market share in September 2021. In 2020, its search engine produced 62% of its income from internet marketing services. 

Latest News: 

• Series A Funding: JIDU, Baidu's intelligent electric vehicle division, revealed that it had raised approximately USD 400 million in Series A funding. Baidu and its strategic partner, Zhejiang Geely Holding Group, sponsored this round of funding. 
• Goal for Carbon Emission: On December 29, Baidu, Inc., and IDC released China's first White Paper on AI's Contribution to achieving the "Dual Carbon" Goals in 2021. Between now and 2060, AI-related technologies are expected to reduce more than 35 billion tonnes of carbon emissions. 

Q3FY21 Results:  

• Increase in Top Line business: The company posted RMB 31,921 million in Q3 FY21 compared to RMB 28,232 million in Q3 FY20, increasing by 13%. 

• Decrease in Bottom Line: The Company had recorded a net loss of RMB 16,559 million in Q3 FY21 as compared to a gain of RMB 13,678 million due to high operating cost and cost of revenue. 
• Strong Cash Position: As of September 30, 2021, the Company had recorded RMB 194.6 billion (USD 30.20 billion) in cash, cash equivalents, restricted cash, and short-term investments. Free cash flow was RMB 691 million (USD 108 million). 

Key Risks:  

• Technology Risk: Any system failure or compromise of security, as well as security breaches and improper access to or exposure of a company's data, might harm its reputation and negatively affect business. 
• Cyber Security Risk: The Company’s business may be affected if it cannot modify or expand its existing technology infrastructure to accommodate increased traffic, content, or additional client requirements. 

Valuation Methodology: Price to Earning Price per Share-based Multiple Based Relative Valuation 

Stock Recommendation:  

Baidu’s estimated revenues guidance to be between RMB 31.0 billion (USD 4.81 billion) and RMB 34.0 billion (USD 5.27 billion) in the fourth quarter of 2021, indicating a growth rate of 2% to 12% over the year. The 52-week high and low of the stock is USD 354.82 and USD 132.14, respectively. Considering the correction of 43.49% in the stock price in the past one year, increase in revenue, strong cash position, and associated risks, we recommend a "HOLD " rating on the stock at the closing price of USD 164.56, as of February 10, 2022. 

BIDU’s 1-Year Technical Price Chart. (Source: REFINITIV, Analysis by Kalkine Group) 

Note 1:The reference data in this report has been partly sourced from REFINITIV. 

Note2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.