| Valuation method | Value, HK$ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 139.30 | -9 |
| Intrinsic value (DCF) | 76.29 | -50 |
| Graham-Dodd Method | 140.90 | -8 |
| Graham Formula | 66.70 | -56 |
Baidu, Inc. (9888.HK) is China's leading AI and internet services company, operating as the dominant search engine provider in the world's largest digital market. Headquartered in Beijing, Baidu has evolved from its core search business into a comprehensive technology ecosystem encompassing AI, cloud computing, autonomous driving, and smart devices. The company operates through two main segments: Baidu Core (search, AI, and cloud services) and iQIYI (premium video streaming platform). Baidu's diversified portfolio includes Baidu App for mobile search, Baidu Maps for navigation, DuerOS smart assistant platform, Apollo autonomous driving technology, and extensive cloud services. As China's answer to Google, Baidu maintains strategic partnerships with major Chinese corporations including Zhejiang Geely Holding Group for smart vehicle development. The company's transition from traditional internet services to AI-driven technology solutions positions it at the forefront of China's technological innovation, serving over a billion users with search, content, and increasingly sophisticated artificial intelligence applications.
Baidu presents a compelling investment case as China's dominant search engine operator with a successful pivot toward high-growth AI and cloud computing segments. The company demonstrates strong financial health with HKD 133.1 billion in revenue and HKD 23.8 billion net income for the period, supported by robust operating cash flow of HKD 21.2 billion. With a market capitalization of approximately HKD 305 billion and a conservative beta of 0.33, Baidu offers relative stability in the volatile tech sector. However, investors should note significant risks including regulatory pressures from Chinese authorities, intense competition in both search and AI segments, and the capital-intensive nature of autonomous driving development. The absence of dividends may deter income-focused investors, while the company's substantial total debt of HKD 79.3 billion warrants monitoring. The investment thesis hinges on Baidu's ability to monetize its AI investments and maintain search dominance amid increasing competition.
Baidu maintains a dominant position in China's search engine market with an estimated 70-75% market share, creating a formidable competitive advantage through its extensive data resources and user behavior insights. The company's core search business generates reliable cash flows that fund its ambitious AI and autonomous driving initiatives, particularly the Apollo self-driving platform which has established early leadership in China's autonomous vehicle ecosystem. Baidu's competitive positioning is strengthened by its comprehensive mobile ecosystem including Baidu App, Haokan short videos, and Baidu Maps, creating cross-platform user engagement. However, the company faces intense competition from Tencent's WeChat ecosystem, which has developed its own search capabilities, and Alibaba's various services that capture user attention and advertising budgets. In cloud computing, Baidu ranks behind Alibaba Cloud and Tencent Cloud in market share, though it differentiates with AI-powered solutions. The iQIYI segment competes directly with Tencent Video and Alibaba's Youku in the crowded streaming market. Baidu's greatest competitive vulnerability lies in its dependence on the Chinese market and susceptibility to regulatory changes, while its greatest strength remains its vast search data that fuels AI development and maintains advertising dominance.