Credit Suisse: Baidu's spin-off of Kunlun Chip for listing helps to unlock value, raising target price to 176 yuan

The research report from Jefferies indicates that Baidu (09888.HK) announced the spin-off of Kunlun Chip for listing in Hong Kong, to demonstrate the independent value of Kunlun Chip, enhance its market image, broaden financing channels, and strengthen management accountability through performance assessments. Additionally, the spin-off will help unlock Baidu's potential value in the artificial intelligence business sector. After the transaction is completed, Kunlun Chip will continue to operate as a subsidiary of Baidu.

The firm noted that Baidu holds approximately 59% equity in Kunlun Chip, which is expected to contribute over RMB 3.5 billion in revenue by 2025. Considering the price discounts between A-shares and H-shares, as well as industry development trends, the firm estimates that Kunlun Chip's valuation (based on 100% ownership) will range from USD 16 billion to USD 23 billion, while the value of Baidu's stake will range from USD 9 billion to USD 13 billion.

The firm maintains a "Buy" rating, raising the target price for Baidu (09888.HK) from HKD 154 to HKD 176, and for Baidu's U.S. stock (BIDU.US) from USD 159 to USD 181. (ss/)