The first quarter of this year's search advertising market environment slightly better than expected

Revenue is expected to be capped: industry insiders say the search advertising market is slightly better than expected in the first quarter of this year. Despite previous concerns about China's economic environment, it has so far not affected search advertising. In the first quarter, many blockbuster shows appeared on the Archie/pps platform, which helped boost Baidu's bargaining power and revenue. We now anticipate that Baidu's first quarter revenue will reach the company's expected 9.24 billion to 9.52 billion yuan ceiling.

Adjusting spending expectations: We have adjusted our spending forecasts for the 2014 fiscal year, especially sales and marketing spending. We believe that the first quarter operating margin will fall sharply, mainly by the Spring Festival during the promotional activities dragged down. But for the entire 2014 fiscal year, our previous operating expenses and operating profit margins were expected to remain unchanged.

Recommended Buy: This year, Baidu's spending will continue to increase, and next year's investment situation is not clear. But we believe that Baidu's revenue gains are accelerating. Based on our 2015-year earnings forecast for each share, Baidu's expected P/E ratio is 23 times times. We believe that the valuation is extremely attractive.

Valuation: We continue to maintain Baidu stock "outperform" rating, while maintaining a 220 dollar target share price unchanged.