Overseas Chinese Equities, Aequitas Research

Ming Lu

A veteran with 19-year experience in equity research.

Geographical coverage:
* Companies operating in China, but listed in Hong Kong and the U.S.
* Previously China A-share (listed in mainland China).

Equity sector coverage:
* Chinese App / Internet-based consumption in China, e.g., Alibaba, Tencent, etc.
* Previously covered education, transportation, telecom, power, bank, advertisement, hotel, etc.

Research methods:
* Generally bottom-up.
* Talk to related people on the ground.  Talk to readers and independent writers for analyzing a news portal.  Talk to parents and teachers for analyzing a tutoring school. 
* Visit stores and show photos as evidence in notes.
* Do technical analysis when finding a short-seller attacking an equity.

Languages:
* English
* Mandarin Chinese (Official language of China)
* Shanghainese (Language of Shanghai, the most developed city in China)
* Cantonese (Language of Hong Kong and Canton Province, one of the most developed provinces in China)

Overseas Chinese Equities

Tencent (700 HK) – Investment Gains Not Sustainable, Reached Our Target, Upgrade to HOLD

Baidu (BIDU) – Yes, COO Saved Baidu, But No, His Resignation Not a Concern

Fat Cash Inflows Yet Traded at 2/3 of Historical P/E Average

Baidu 4Q17: Revenue & EPS Beat; 1Q18 Guidance Slightly Ahead; Planned IQiyi IPO

Equity Bottom-Up

<ul class=""><li>Stock price surged after Q1 result release, closed about 10% over two weeks before when we posted our last buy suggestion. But we believe there is still 35% upside, at least.</li><li>We value Baidu by a straightforward P/E band, but iQiyi, without complete data, may bring additional value.</li><li>Search engine margin improved 13 ppt yoy.</li><li><a href="https://www.smartkarma.com/entities/26755" target="_blank" data-smartkarma-citation="entities:26755:1">iQIYI Inc (IQ US)</a> accelerated the general revenue growth to 24% yoy from 18% yoy for Baidu Core only.</li></ul>

Stock price surged after Q1 result release, closed about 10% over two weeks before when we posted our last buy suggestion. But we believe there is still 35% upside, at least.We value Baidu by a straightforward P/E band, but iQiyi, without complete data, may bring additional value.Search engine margin improved 13 ppt yoy.iQIYI Inc (IQ US) accelerated the general revenue growth to 24% yoy from 18% yoy for Baidu Core only.

BIDU – Break Down Q1 into Search Engine and IQiyi, Upside At Least 35%