- 1Q08 dil. EPS was US$0.60, in-line with
Bloomberg consensus, due to strong revenue
and lower tax rate. 1Q08 revenue was 4.8%
above high end of guidance due to traffic
growth and, in our view, keyword pricing
rebound in Mar 08. Gross margin in 1Q08
was 60.2%, down from 62.2% in 4Q07, due
to seasonality and rising traffic acquisition
costs (% of revenue). Net cash per ADR was
- Active customer in 1Q08 was 161,000, up
43.8% YoY, whereas ARPU was up 45% YoY. Despite
large SMEs base in China, Baidu customer
growth rate has been below ARPU growth in four
consecutive quarters. TAC (% of total revenue)
was 13.3% in 1Q08, higher than 12.7% in 4Q07.
Due to rising reliance on the 160-170k Baidu
Union, TAC % will increase to 14.3% in 4Q08.
- 2Q08 revenue guidance at RMB780-800 mn
implied YoY growth rate at 94-99% only, down
from 108% in 1Q08 and 109% in 2Q07. As guidance
below our forecast, we cut 08 dil. EPS by 7%.
DCF target price was cut from US$251 to US$245.
Trading at 70x PER and 1.7x PEG, Baidu is not
attractive. Reiterate Underperform.