baidu nasdaq:bidu upgraded

WWW.BAIDU.COM

BIDU:NASDAQ

Date: 28.04.11

Symbol: BIDU

Exchange: Nasdaq

Industry: Internet Info

Provider

Sector: Technology

Recommendation:

Target Price: 200.00 USD

Current Price: 151.11 USD

Summary

• Sees Q2 rev between $493.3 mln - $503.9 mln. (Adds earnings per ADS comparison to expectations, details, background)

• For the first quarter, Baidu reported net income of $163.5 million, or 47 cents per American Depository Share. This compared with $70.4 million, or $2.10 per share, a year ago, before a 10-for-1 stock split.

• Baidu's total revenue for the first quarter was $372 million, above its own forecast of $360.6 million to $371.2 million and up roughly 88 percent from a year ago. Analysts estimates called for revenue of $367.3 million.

• China, with more than 450 million users, is the world's

largest Internet market

Fundamental Data

Market Cap ($M): 52.66B

Avg.Vol (10Day): 7,706,420

52 Week High/Low: 154.89-62.50

P/E ratio (TTM): 97.74

P/B ratio: 40.93

Dividend yield (%): N/A

ROA (%): 28.76

ROE (%): 53.58

Profit Margin (%): 44.54

Operating Margin (%): 50.02

Snapshot - Baidu Inc/China (BIDU)

SUMMARY

INTRA-DAY INTERACTIVE CHART

Change -1.260 (-0.827%)

Bid N.A.

Ask N.A.

Open 153.600

High 153.670

Low 146.180

Volume N.A.

52-Week Range 154.89 - 62.00

1-Yr Return 143.185%

Earnings - Baidu Inc/China (BIDU)

EARNINGS

FUNDAMENTALS

Earnings Past 12 Months 11.780 Shares (Millions) 270.453

Quarter Est. EPS (03/11) 0.44 Market Cap (Millions) 52,661.330

Quarter Est. EPS (06/11) 0.62 Float (Millions) N.A.

Year Est. EPS (12/11) 2.55 Return on Equity 53.579

Price/Earnings (Trailing) 83.407 Short Interest 5,036,649.000

Relative P/E 5.350 Last Dividend Reported N.A.

Earnings Growth Rate 132.200 Dividend Yield (ttm) N.A.

Estimated P/E 104.800 Relative Dividend Yield N.A.

Powered by Bloomberg

Company Profile

Baidu, Inc. provides Chinese and Japanese language Internet search services. Its search services enable users to find

relevant information online, including Web pages, news, images, multimedia files, and blogs through the links provided

on its Websites.

The company also offers online community-based products and entertainment platforms; an instant messaging

service; and a consumer-oriented e-commerce platform. In addition, it designs and delivers online marketing services

and auction-based P4P services that enable its customers to reach users who search for information related to their

products or services.

The company serves online marketing customers consisting of small and medium sized enterprises, large domestic

corporations, and Chinese divisions or subsidiaries of multinational corporations primarily operating in the medical,

machinery, education, franchising, electronic products, e-commerce, ticketing, tourism, information technology,

consumer products, real estate, entertainment, and financial services industries.

It sells its online marketing services directly, as well as through its distribution network. The company was formerly

known as Baidu.com, Inc. and changed its name to Baidu, Inc. in December 2008. Baidu, Inc. was founded in 2000

and is headquartered in Beijing, the Peoples Republic of China.

News

Baidu sees stronger-than-expected Q2 revenue

Q1 rev $372 mln vs market estimate $367.3 mln

* Q1 earnings per ADS 47 cents vs Street's 45 cents

* Sees Q2 rev between $493.3 mln - $503.9 mln. (Adds earnings per ADS comparison to expectations, details, background)

SAN FRANCISCO, April 27 (Reuters) - Baidu Inc (BIDU.O) more than doubled its profit in the first quarter and forecast stronger-than-expected revenue for the second quarter, betting on strong online advertising demand among China's businesses.

Shares of Baidu, which are up more than 50 percent since the start of the year, were down slightly at $150.65 in after-hours trade after closing Wednesday's regular session at $151.11.

Baidu, the No. 1 Internet search engine in China, said it expects second-quarter revenue of $493.3 million to $503.9 million, above analysts' forecasts of $484.2 million.

For the first quarter, Baidu reported net income of $163.5 million, or 47 cents per American Depository Share. This compared with $70.4 million, or $2.10 per share, a year ago, before a 10-for-1 stock split.

The average analyst expectation called for earnings per ADS of 45 cents.

Baidu Chief Financial Officer Jennifer Li said in a statement that the company would continue to support long-term growth by focusing significant investment on research and development, marketing and network infrastructure, among other things, in the coming quarters.

China, with more than 450 million users, is the world's largest Internet market. Yet with Internet penetration hovering around 30 percent and lack of sophisticated users outside the big cities, the potential for growth is huge.

Baidu, which increased its focus on e-commerce and online video, surged in dominance in China's search market after Google Inc (GOOG.O) curtailed its operations following a high-profile fallout with Beijing over censorship last year.

But analysts see an increasingly competitive landscape in China's search market in the next few years, as competitors such as Sohu.com (SOHU.O), Alibaba Group and Tencent Holdings (0700.HK) wrestle for market share.

Baidu's total revenue for the first quarter was $372 million, above its own forecast of $360.6 million to $371.2 million and up roughly 88 percent from a year ago. Analysts estimates called for revenue of $367.3 million.

News

Bulls bet on more Baidu bounces after earnings

Baidu to report earnings after the bell

* Call buying notably exceeds put buying in past 10 days

* Baidu shares up 43 pct in first quarter

NEW YORK, April 27 (Reuters) - Investors are betting Baidu Inc (BIDU.O) will keep rallying after the Beijing-based Internet search giant's earnings report after the bell on Wednesday.

Baidu, a favorite among investors bullish on China, jumped about 43 percent in the first quarter. The stock also rose around 9 percent a day after the company's previous earnings announcement on a strong near term outlook.

The $155 call options for May were the most active, but the $135 and $140 puts were also seeing action, suggesting some nervous investors are hedging as the stock is vulnerable for a pullback, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio.

"It's strange. You would think that people would be bearish considering how high the stock is, but there is a lot of optimism going into earnings in the options market," he said.

"Call buying to put buying ratio in the May series of options are about 89 percent higher in the last 10 days compared to the past year."

About 72,000 calls and 44,000 puts traded in Baidu by 2:35 p.m. EDT, above its total average daily volume of 72,000 contracts, according to options analytics firm Trade Alert.

Options activity also suggested about a 8 percent pop in the stock after the earnings, analysts said.

The shares are currently trading down 2.1 percent at $149.23. China-based Internet plays have been popular among investors as more companies issue shares publicly. Baidu is the No. 1 Internet search engine in China with a 70 percent market share.

China, with more than 450 million users, is the world's largest Internet market. Baidu grabbed more market share last year after rival Google Inc (GOOG.O) curtailed its operations following a high-profile fallout with Beijing over censorship.

Baidu is seen as somewhat vulnerable to a short squeeze, according to Thomson Reuters StarMine data. However, overall short interest is relatively low at 1.7 percent.

"There seems to be a bit of caution after such a rally, but we believe there is still more room for a run... we still see a lot of momentum," said Randall Warren, chief investment officer of Warren Financial Service in Exton, Pennsylvania, who owns the stock.

StarMine's intrinsic valuation suggests the shares are overvalued at this price, and should trade at about $50.82, making its price about three times its intrinsic value when calculating estimated growth for Baidu over the next 10 years.

The company is expected to report earnings per share of 45 cents, about double the earnings in the same quarter last year, according to Thomson Reuters I/B/E/S.

REVENUE

Periods 2009 2010

March 810.711 1293.92

June 1097.47 1914.39

September 1278.7 2255.86

December 1260.89 2450.91

Note: Units in Millions of Renminbi

EARNINGS PER SHARE

Periods 2009 2010

March 5.21531 13.7713

June 11.0179 23.9844

September 14.1428 29.9693

December 12.2676 33.2155

Note: Units in Renminbi

CONSENSUS ESTIMATES ANALYSIS

# of Estimates Mean High Low 1 Year Ago

SALES (in millions)

Quarter Ending Jun-11 13 483.19 498.70 456.30 357.55

Quarter Ending Sep-11 13 545.71 577.82 519.76 401.70

Year Ending Dec-11 27 1,937.63 2,087.84 1,767.58 1,413.10

Year Ending Dec-12 26 2,858.12 3,218.51 2,131.69 2,137.53

EARNINGS (per share)

Quarter Ending Jun-11 13 0.63 0.65 0.57 0.37

Quarter Ending Sep-11 13 0.71 0.74 0.66 0.42

Year Ending Dec-11 25 2.53 2.86 2.14 1.40

Year Ending Dec-12 25 3.74 4.82 2.60 1.99

LT Growth Rate (%) 12 56.80 133.00 31.10 43.07

Sales and Earnings Figures in U.S. Dollars (USD)

VALUATION RATIOS

Company Industry Sector S&P 500

P/E Ratio (TTM) 98.53 19.34 17.85 18.06

P/E High - Last 5 Yrs. 157.18 39.13 64.29 95.58

P/E Low - Last 5 Yrs. 29.51 12.17 12.41 12.36

Beta 1.73 0.82 0.97 1.29

Price to Sales (TTM) 43.79 4.93 3.47 2.28

Price to Book (MRQ) 41.23 5.27 3.87 11.96

Price to Tangible Book (MRQ) 42.13 6.31 4.76 5.17

Price to Cash Flow (TTM) 89.86 10.10 9.26 8.62

Price to Free Cash Flow (TTM) -- 46.90 35.58 58.48

% Owned Institutions -- -- -- --

DIVIDENDS


Dividend Yield -- 1.15 1.63 1.74

Dividend Yield - 5 Year Avg. 0.00 1.06 1.33 2.46

Dividend 5 Year Growth Rate -- 15.23 11.46 -3.93

Payout Ratio(TTM) -- 18.46 22.94 41.67

GROWTH RATES


Sales (MRQ) vs Qtr. 1 Yr. Ago 94.38 -28.61 -8.75 8.04

Sales (TTM) vs TTM 1 Yr. Ago 77.96 19.65 19.88 10.72

Sales - 5 Yr. Growth Rate 90.05 24.03 17.92 7.55

EPS (MRQ) vs Qtr. 1 Yr. Ago 170.76 37.12 500.33 49.80

EPS (TTM) vs TTM 1 Yr. Ago 136.71 -- -- --

EPS - 5 Yr. Growth Rate 132.51 25.16 15.62 4.89

Capital Spending - 5 Yr. Growth Rate 60.58 13.48 7.91 3.63

FINANCIAL STRENGTH


Quick Ratio (MRQ) -- 2.59 2.27 0.63

Current Ratio (MRQ) 3.44 2.96 2.68 0.97

LT Debt to Equity (MRQ) 1.02 12.91 14.30 94.78

Total Debt to Equity (MRQ) 1.02 21.96 39.54 144.40

Interest Coverage (TTM) -- 0.62 0.62 17.01

PROFITABILITY RATIOS


Gross Margin (TTM) 72.84 36.63 30.34 32.48

Gross Margin - 5 Yr. Avg. 67.93 43.44 39.76 30.39

EBITD Margin (TTM) 54.21 -- -- --

EBITD - 5 Yr. Avg 47.84 27.23 22.62 19.36

Operating Margin (TTM) 50.02 25.95 17.64 --

Operating Margin - 5 Yr. Avg. 41.17 22.00 16.84 14.80

Pre-Tax Margin (TTM) 51.31 25.97 17.65 15.64

Pre-Tax Margin - 5 Yr. Avg. 43.18 22.90 17.47 14.38

Net Profit Margin (TTM) 44.54 18.99 12.66 11.54

Net Profit Margin - 5 Yr. Avg. 38.50 17.61 12.99 10.61

Effective Tax Rate (TTM) 13.20 17.75 18.98 22.16

Effecitve Tax Rate - 5 Yr. Avg. 10.84 33.57 32.90 24.79

EFFICIENCY


Revenue/Employee (TTM) 111,387 4,181,136 6,485,532 722,317

Net Income/Employee (TTM) 49,609 1,009,092 789,857 88,616

Receivable Turnover (TTM) 28.40 4.46 4.75 7.62

Inventory Turnover (TTM) -- 273.00 167.48 6.95

Asset Turnover (TTM) 0.92 0.77 0.80 0.54

MANAGEMENT EFFECTIVENESS


Return on Assets (TTM) 40.98 16.40 11.68 5.86

Return on Assets - 5 Yr. Avg. 34.05 19.14 13.94 5.75

Return on Investment (TTM) 53.19 20.58 15.38 7.51

Return on Investment - 5 Yr. Avg. 43.68 25.18 18.97 7.51

Return on Equity (TTM) 53.58 22.31 16.84 17.19

Return on Equity - 5 Yr. Avg. 43.86 27.28 20.59 14.97

GROWTH FOR BAIDU INC

1 Year 3 Years 5 Years

Sales % 77.96 65.55 90.05

EPS % 136.41 77.30 132.51

Dividend % -- -- --

Note: Units in Millions of US Dollars

PERFORMANCE FOR BAIDU INC

Period

%

Actual

% vs.

S&P 500

Rank In

Industry

Industry

Rank

4 Week 12.04 9.72 76 31

13 Week 43.89 37.90 95 31

26 Week 35.30 19.07 88 55

52 Week 137.76 113.91 97 77

YTD 57.85 47.36 98 31

Note:: Rank is a percentile that ranges from 0 to 99, with 99 = best.

INSTITUTIONAL HOLDERS

% Shares Owned: 54.60%

# of Holders: 544

Total Shares Held: 190,269,755

3 Mo. Net Change: 1,797,165

# New Positions: 17

# Closed Positions: 4

# Increased Positions: 52

# Reduced Positions: 38

# Net Buyers: 14

Powered by Reuters

Contact Detail:

Chutinush Taksinapinunt

Business Development Director

Heffernan Capital Management

Email: [email protected]

Chutinush Taksinapinunt holds a Bachelor of Business Administrators degree Majoring in

Finance and Banking. Chutinush Taksinapinunt is an experienced market maker and Portfolio

Manager, having worked with some of Thailand’s largest Securities Company and Financial

Institutions.

Price Estimate by Shayne Heffernan PhD

Shayne Heffernan of Ebeling Heffernan holds a PhD in Economics serves as CEO of Heffernan

Holdings Inc and Co Founder of Ebeling Heffernan www.ebeling-heffernan.com

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Tel: +65 6329 6408Fax: +65 6329 9699

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