China, Emerging Markets

Ryan Soh 苏祥发

Equity Bottom-Up

Baidu's good Q2 results signal a climb towards a 45%+ upside, but risks remain<a href="https://www.smartkarma.com/entities/179" target="_blank" data-smartkarma-citation="entities:179:1">Baidu</a> had a good Q2 - it <a href="http://ir.baidu.com/phoenix.zhtml?c=188488&amp;p=irol-newsArticle&amp;ID=2289721" target="_blank">beat</a> earnings expectations by 56%, and grew revenue, operating income and net income by 14%, 47% and 83%. Consequently, the stock traded up 9.45%, on the last Friday of July this year, comfortably beating whatever benchmarks set before it.The main reason it did well this quarter is because it managed to cut costs, and the market missed this - revenues were <a href="https://markets.ft.com/data/equities/tearsheet/forecasts?s=BIDU:NSQ" target="_blank">broadly in line</a> with analyst…

Baidu's good Q2 results signal a climb towards a 45%+ upside, but risks remainBaidu had a good Q2 - it beat earnings expectations by 56%, and grew revenue, operating income and net income by 14%, 47% and 83%. Consequently, the stock traded up 9.45%, on the last Friday of July this year, comfortably beating whatever benchmarks set before it.The main reason it did well this quarter is because it managed to cut costs, and the market missed this - revenues were broadly in line with analyst…

Analyst, qcAlpha Earnings Coverage, Zero One

Vincent Fernando, CFA

Analyst, qcAlpha Earnings Coverage

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<div class="content-highlight"><h2>What You Need to Know</h2></div><ul>
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Revenue increased by 14.3% YoY to RMB20.9 billion, while adjusted diluted EPS grew by 98% to US$2.36. Revenue was in-line with analyst consensus, while EPS crushed estimates by 56%.</li>
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Baidu’s advertiser cleanup efforts continue. Online Marketing Customers fell by 20.9% YoY to 470,000 customers, while ARPUs rose by 32% YoY to RMB37,500.</li>
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Margins recovered strongly on tighter spending. 2Q17 adjusted operating margins expanded by 610 basis points to 24.0% due to less spending in O2O…</li>
</ul>

What You Need to Know

Revenue increased by 14.3% YoY to RMB20.9 billion, while adjusted diluted EPS grew by 98% to US$2.36. Revenue was in-line with analyst consensus, while EPS crushed estimates by 56%.

Baidu’s advertiser cleanup efforts continue. Online Marketing Customers fell by 20.9% YoY to 470,000 customers, while ARPUs rose by 32% YoY to RMB37,500.

Margins recovered strongly on tighter spending. 2Q17 adjusted operating margins expanded by 610 basis points to 24.0% due to less spending in O2O…


Baidu 2Q17 Earnings: EPS Smashes Consensus on Tighter Spending; 3Q17 Guidance Slightly Ahead

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI AC Asia Pacific Excluding Japan Index / Technical Analysis

MSCI AC Asia Pacific Excluding Japan Index

As all eyes are focused on Europe—the current darling trade—Asia is emerging as a technical leader. The MSCI All-Country Asia Index (below) is breaking out from a two-year base. Relative strength (vs. MSCI ACWI ex-US) depicts a similar pattern; after lagging since mid-2015, its RS trend has slowly rounded higher, resulting in the recent breakout. Combined, this warrants an overweight.Today’s report is a country by country review of leadership and actionable themes within the region, including stock recommendations.

As all eyes are focused on Europe—the current darling trade—Asia is emerging as a technical leader. The MSCI All-Country Asia Index (below) is breaking out from a two-year base. Relative strength (vs. MSCI ACWI ex-US) depicts a similar pattern; after lagging since mid-2015, its RS trend has slowly rounded higher, resulting in the recent breakout. Combined, this warrants an overweight.Today’s report is a country by country review of leadership and actionable themes within the region, including stock recommendations.

Making sense of the Global Market, Euromonitor International Ltd.

Yu Mitsuhashi

Making sense of the Global Market

Euromonitor International Ltd.

We are a global market research company focused on industries, countries, economies and consumers worldwide. Our cross-country comparable research helps your organisation identify opportunities and develop growth strategies in countries and regions across the globe. With offices around the world, 1,200 analysts in 100 countries and market research on every key trend and driver, we give you powerful access to the real story behind consumer change.

Thematic (Sector/Industry)

Euromonitor International projects that China’s sporting and recreational services industry will more than double over 2016-2025, contributing to the country’s gradual transition towards a services and consumption-driven economy. According to the latest data available, by 2025, China is set to become the third largest sporting and recreational services industry globally, overtaking Germany and Japan. Strong growth and the increasing importance of sporting services in China will be driven by changing Chinese lifestyles, growing government support and increasing private investment in China’s sports industry.

Euromonitor International projects that China’s sporting and recreational services industry will more than double over 2016-2025, contributing to the country’s gradual transition towards a services and consumption-driven economy. According to the latest data available, by 2025, China is set to become the third largest sporting and recreational services industry globally, overtaking Germany and Japan. Strong growth and the increasing importance of sporting services in China will be driven by changing Chinese lifestyles, growing government support and increasing private investment in China’s sports industry.

Sporting and Recreational Services the Next Driver of China's Economic Growth

Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

Investing thematically in the electric/autonomous vehicle trends covered regularly since 2013 has proved profitable, with many battery, lithium and image sensor names up 3-4x.The MSCI auto component sector continues to outperform carmakers as auto complexity grows - Valeo estimates its powertrain content for a plug-in hybrid is 9x more valuable than a regular car.Volvo’s announcement that it was making all its output at least hybrid from 2019 was less significant than Baidu offering its AI…

Investing thematically in the electric/autonomous vehicle trends covered regularly since 2013 has proved profitable, with many battery, lithium and image sensor names up 3-4x.The MSCI auto component sector continues to outperform carmakers as auto complexity grows - Valeo estimates its powertrain content for a plug-in hybrid is 9x more valuable than a regular car.Volvo’s announcement that it was making all its output at least hybrid from 2019 was less significant than Baidu offering its AI…

Electrification and Autonomous Trends Reshaping Auto Industry…

China

Baidu, Inc. operates an Internet search engine. The Company offers algorithmic search, enterprise search, news, MP3, and image searches, voice assistance, online storage, and navigation services. Baidu serves clients globally.

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Baidu (BIDU US)

Thinking Through Baidu's Q2

Baidu's good Q2 results signal a climb towards a 45%+ upside, but risks remainBaidu had a good Q2 - it beat earnings expectations by 56%, and grew...

Ryan Soh 苏祥发

Baidu 2Q17 Earnings: EPS Smashes Consensus on Tighter Spending; 3Q17 Guidance Slightly Ahead

What You Need to Know Revenue increased by 14.3% YoY to RMB20.9 billion, while adjusted diluted EPS grew by 98% to US$2.36. Revenue was in-line...

Vincent Fernando, CFA

Asia: Developing Leadership

As all eyes are focused on Europe—the current darling trade—Asia is emerging as a technical leader. The MSCI All-Country Asia Index (below) is...

Vermilion Research

Sporting and Recreational Services the Next Driver of China's Economic Growth

Euromonitor International projects that China’s sporting and recreational services industry will more than double over 2016-2025, contributing to...

Euromonitor International Ltd.

Electrification and Autonomous Trends Reshaping Auto Industry…

Investing thematically in the electric/autonomous vehicle trends covered regularly since 2013 has proved profitable, with many battery, lithium and...

Sean Maher

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