Daiwa Securities reiterates "Buy" rating on Baidu, optimistic about the spin-off of Kunlun Chip bringing revaluation opportunities

Daiwa published a research report stating that Baidu-SW (09888.HK) had revenue in line with expectations in the fourth quarter of last year, while its profit performance exceeded expectations, mainly benefiting from cost control leading to improved gross margins. Management revealed that the plan to spin off Kunlun Chip is still in progress, and Daiwa believes it will become a short-term catalyst for valuation. According to their calculations, the implied equity value of Kunlun Chip per share is already equivalent to about half of Baidu's latest market value, anticipating a significant revaluation opportunity.

Daiwa pointed out that Baidu's cloud business growth has slowed, but the revenue structure continues to improve. Last quarter, subscription-based revenue from AI high-performance computing facilities grew by 143% year-on-year, indicating enhanced profitability. They reiterated a "Buy" rating, raising the target price from 171 yuan to 175 yuan