The oxen group, the financial analyst, released its investment report today

The following is a summary of the contents of the report:

Baidu, China's Internet search giant, has risen 50% per cent since the start of the year, thanks largely to strong revenue and growth strategies. We believe that in the next 12 months, Baidu's share price still has a 20% rise in space. To this end, we continue to maintain the "holding" Baidu stock rating, the target price of 184 U.S. dollars. Although Baidu has some potential projects, but the current core valuation is slightly higher than our expectations, so we do not give Baidu stock "buy" rating.

Baidu is China's largest search engine, with a market share of 63%. But the market share has slipped in the past year, at 78% in 2012. Meanwhile, competitors ' market share has increased. Recently, China's third and fourth-largest search engine Sogou and search is being integrated, the integration will have the Chinese search market 14% of the share.

As the market competition intensified, Baidu began to exert a mobile market, through the promotion of mobile search experience in the market one step ahead. Because mobile search traffic is becoming more and more popular, this part of the business will become an important driving force for future market growth. 2012 Mobile search traffic grew 94% year-on-year, while PC search traffic fell 20%. With the introduction of LTE services by the end of this year, smartphone users will rise more than their overall mobile subscribers. From 2012 to 2013, smartphone users rose by 100%. From 2013 to 2014, the rise is expected to reach 50%. Therefore, the mobile Internet will provide enough space for the development of Baidu.

With the development of smartphones, software applications have also grown. October 1 This year, Baidu completed the mobile application release Platform 91 Wireless acquisition. In China, mobile games account for much of the download. Along with other services, 91 wireless will help Baidu gain a foothold in this core market. The deal makes Baidu the largest application publishing platform in China. Another major mobile product is lightweight applications (Light app), which can provide users with some of the most popular applications. Currently 0.1% of applications account for 70% of total downloads. and light application will give the other 99.9% of the application of greater exposure opportunities, help promote Baidu traffic growth.

Siteapp is another app designed to boost mobile revenue, helping businesses create their own mobile sites for free. This can help Baidu to win mobile traffic while also allowing customers to improve their online performance with minimal cost. By the end of this year, the mobile advertising market will reach 2 billion dollars, while Baidu is in a good position.

Through research and development spending can see Baidu's innovation and expansion of awareness, as of the last quarter, Baidu research and development spending rose 77%. Meanwhile, sales, general and administrative expenses have reached 115% per cent year-on-year. These expenses led to a year-on-year increase in Baidu's operating profit of only 1.2%, but we believe that Baidu will soon be rewarded.

Valuation

Baidu remains committed to long-term investment compared with its main competitor. Baidu's P/E ratio (PE) is 30.71 times times better than rival Sohu and Qihoo 360, which have a earnings ratio of 871.3 times and 158.6 times times respectively. Baidu's Peg (P/E ratio) is 1.34 times times more attractive than the two-digit peg, Sohu and Qihoo.

Accounts receivable turnover days (hereinafter referred to as "DSO") is a measure of a company's product demand, one of the core indicators. Baidu's DSO for 20.17 days, less than Sohu and Odd Tiger DSO. But in the past year, the number of Baidu has been growing, in 2007 only 9.13 days. This may mean that consumer demand for Baidu services is not as strong as before, in order to maintain revenue growth, Baidu has to extend the DSO. Baidu's current gross margin of 62.8%, also in the downward trend, is currently below Sohu and Qihoo, the two were 66.8% and 88.8% respectively.

Summary

Baidu already has a huge user base. We believe that with some of the company's projects and expansion into the mobile market, customers are reluctant to turn to rival services. Based on current valuations, Baidu's valuations are better than those of its rivals. But the trend in revenue and profit margins suggests that the market is fiercely competitive and Baidu's gains may have peaked.

From 2013 to 2017, we expect Baidu's operating profit to double, as China's Internet market will continue to grow. Based on current valuations, these growth factors are already reflected in share prices. In any case, we believe that Baidu's share price in the next 12 months there will be an additional 20% growth space.