[PUBLIC 2019.08.20] BIDU Valuation Model
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Revenue (Core Only)5
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201820192020202120222023
5-Year CAGR
Base Rate
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Search / Core (excl cloud)$10.58$10.58$10.90$11.55$12.24$12.984.17%
72.5% comparable companies grew 0%+; 40.6% grew 5%+
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Cloud$0.50$1.00$1.50$1.95$2.44$2.9342.37%
1% of comparable companies grew 45%+; AWS grew 49%.
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TOTAL$11.08$11.58$12.40$13.50$14.68$15.907.50%
41% of comparable companies grew 5%+
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Implied Total YoY Rev Growth4.51%7.06%8.90%8.74%8.32%
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Valuation only includes Baidu Core. For IQIYI, see: https://docs.google.com/spreadsheets/d/15EeQ6NZhbIzlUr_vu6qbm_rogAsNw5eJmJKyQ2dlfwg
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Long Term Blended Operating Margin
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% of Revenue
EBIT Target
Weighted EBIT
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Search / Core81.61%24%19.59%
<-- Currently steady at around 30%, but assume it will decrease due to lower hardware (DuerOS) margins. Google's EBIT margin is 25% (but this is for entire biz, which is likely dampened by spend on YouTube and other moonshot projects, so true "search" EBIT is likely much higher)
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Cloud18.39%20%3.68%
<- AWS has 25%+ op margins
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Weighted Op Margin Target23.26%
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Base Rate Adjustment
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Information Tech average is 15% w/0.62 five-year correlation coefficient
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Base Rate Adjusted Op Margin20.12%
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Notes
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Does not include optionality of:
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Apollo / Autonomous Driving
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DuerOS
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CTrip growth
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