The research team at OCBC Investment Research believes that Baidu Inc remains “on track to benefit from the recovery in SME ad demand” given that the worst of the Covid-19 pandemic is behind us.
Furthermore, the team believes that daily active users (DAU) for Baidu’s app should exhibit healthy growth, which should, in turn, lay the foundation for the company’s in-app initiatives.
Baidu has also announced that it plans to establish a company to produce intelligent electric vehicles, and that it has entered into a strategic partnership with automotive company, Geely.
“In our view, this could be an important development as it demonstrates Baidu’s desire to find monetisation avenues for its autonomous driving technology, now potentially through a hardware-software integration,” says the team in a Jan 14 note.
“At this juncture, we believe that Baidu, through this tie-up, will be able to amass more real-time data, which could allow it to refine and potentially license its autonomous driving solution to other OEMs in the future,” it adds.
The team also noted that Baidu’s share price has returned some 96% in just over a year since it upgraded Baidu to “buy” in November 2019.
The way they see it, market participants increasingly appreciate the recovery in Baidu’s core ad business, as well as its increasing headway into the autonomous driving space where it enjoys sector leadership.
“These have helped to bolster previously-depressed valuation multiples,” it writes.
“We believe that the next upcoming catalyst could be a potential second listing in Hong Kong, which has been reported by the media.”
“While this remains speculative, we are not surprised if it should materialize, given the trend of second listings pursued by a number of other Chinese internet companies with ADRs,” it adds.
Shares in Baidu closed 1.05% down at US$236.94 on Jan 13.
