Baidu, which only valued 10PE core business, was wrongly killed compared to the valuation of Ali and Tencent’s 20-30 PE.
This article is from Chang’an’s original snowball column “. The original question “Do Baidu search still earn 10 years?
The Baidu report shows that the core business of 2018 (dividing iQiyi, other income) has a profit of 24.936 billion yuan, calculated by the stock price of 100 US dollars (35 billion US dollars market value), PE is about 10 times.
Because of the “underestimation”, there are some golfers, no matter how much they are on the snowball, Baidu is so fierce, there will be a while, secretly buying Baidu stock in the middle of the night.
I am one of them, but I have been buying it all the time. Is it wrong to read the basics of Baidu?
Start with a few common misconceptions about Baidu from golfers:
First, Baidu powder on snowball has always had two misunderstandings on Baidu:
1. Think Baidu advertising business is very competitive
Does Baidu’s advertising business be competitive? Perhaps the above table has given us the answer. In mainstream Internet advertising companies such as Baidu, Tencent, Weibo, Sohu, and Sogou, the authors listed their annual growth rate in eight quarters. In this table, we can roughly see the competitiveness of each company’s advertising business: Tencent Social > Weibo > Sogou > Tencent Media > Baidu > Netease > Sohu.
2. Considering that Baidu’s operating income has increased by 20% in 17 years and 18 years, the main business is still growing rapidly.
Many investors found that Baidu’s revenue increased by 20% for two consecutive years from the financial report. That is to say, Baidu’s main business is growing rapidly. This is actually a great misunderstanding of Baidu.
Further, we divested other business income and consolidated iQI advertising revenue.
Acquired the growth rate of Baidu’s online marketing business: in 2017 and 2018, the annual growth rate was only 10.39% and 11.80%. What is even more surprising is that the online marketing business grew by only 3.82% and 2.84% in Q4 and 19 years respectively. In view of the 19Q2 financial report, the growth rate of advertising revenue of Sogou, Sohu and NetEase has continued to decline. Baidu’s 19-year Q2 advertising performance is likely to continue to decline.
Second, give Baidu a value
In fact, for Baidu, there are many Internet giants that are still in the business of gestation, and valuation is difficult.
For example, when the author does not understand Baidu’s business, looking at the following table alone, it may be concluded that “the Baidu content cost rate continues to rise and the first quarter operating loss”.
I once misunderstood that the decline in Baidu’s operating profit margin was due to the high cost of content such as Baijiahao and good-looking videos.
But if you look at the iQiyi report, you will find that in addition to iQiyi, the content cost of Baidu Baijia, good-looking video and other services is actually very low.
So Baidu’s core business net profit margin is about 30%, it is indeed a cash cow, so what is the value of Baidu? Let’s take a look at it a little bit.
A. Baidu Core Business Valuation (Divesting Iqiyi)
Although Baidu’s 2018 online marketing business grew at a rate of only 11.8%, but the operating profit margin increased from 25% to 30%, Baidu’s core business generated a profit of approximately 24.936 billion. Since there is no domestic enterprise that can shake the status of Baidu search engine, this part is conservatively valued by PEG=1 and PE=12, and the valuation is about 300 billion, which is 42.85 billion US dollars.
B. Iqiyi, Ctrip partial valuation
Ctrip 19% shares = 19.9% * 186 = $3.534 billion, and iQiyi 58% shares = 58% * 123 = $71.34 billion.
Holding conservatively estimates a 70% discount, which is $4.77 billion.
C. Partial valuation of the balance sheet
As of the first quarter of 19, Baidu’s working capital was 1578-572=1100 million yuan.
The current assets include: cash and equivalents of 32.39 billion yuan; short-term investment of 109 billion yuan;
The current liabilities include: customer advances of 7.059 billion yuan; short-term debts of 3.665 billion yuan;
Net cash assets were 130.6 billion yuan, or $18.6 billion.
D.Apollo Driverless Technology Valuation
In the 2018 Autopilot Takeover Report disclosed by the California Aircraft and Vehicle Administration, Baidu’s driverless technology ranked seventh. In the same industry, Volkswagen invested in Ford ArgoAI in July this year, with a valuation of 7 billion US dollars; Softbank invested in General Motors’ Cruise, with a valuation of 15 billion US dollars; it is reported that Google’s Waymo valuation is 175 billion US dollars. Apollo is China’s leading autopilot representative, assuming it is worth $7 billion, just like the Ford ArgoAI valuation.
E. Long-term investments other than Ctrip under the equity method
Baidu has a long-term investment of 80.6 billion yuan in the first quarter, excluding the calculated Ctrip equity of 30.9 billion yuan and the remaining 49.7 billion.
Including: 440 million US dollars investment from Weimar Automobile, 310 million US dollars investment in Xinchao Media, 600 million US dollars investment in Netease Cloud Music, 500 million US dollars in startups, etc., 100 million US dollars in future cars, etc. Difficult to value, the balance of the investment report shows a valuation of 7.1 billion US dollars.
So, we can find a search for 42.85 billion US dollars, iQiyi Ctrip equity valuation of 7.47 billion US dollars, Apollo 7 billion US dollars, net cash assets valuation of 18.6 billion US dollars, equity method to calculate long-term investment of 7.1 billion US dollars, The most conservative valuation of Baidu’s businesses is $83 billion.
Third, the market has wrongly killed Baidu?
The conservative valuation of various businesses is $83 billion, while Baidu’s current market capitalization is only $34 billion. Baidu, which only valued 10PE core business, was wrongly killed compared to the valuation of Ali and Tencent’s 20-30 PE.
To explore this issue, we must first figure out why Ali and Tencent can enjoy valuations far higher than Baidu.
The Internet industry is a very large-scale industry. Ali, Tencent, Amazon and other companies have used the flywheel effect to build an ecosystem and moat that others cannot surpass, and gradually become a company without borders.
Alibaba has established a payment system and cloud services, and Tencent has optimized its socialization. It has become the world’s largest game company. Amazon has also established AWS cloud services and electronic copyright operations with e-commerce.
These companies have one thing in common: the main business can provide a steady growth in cash flow for its continuous expansion of new business and gradually grow to no boundaries.
The Yahoo!, which did not play the flywheel and started the search, relied on the market value of powerful products such as News, Answer, Flickr and Pipes to reach 130 billion US dollars in 2000. But then, because Yahoo thinks that relying on search means “content is still someone else’s”, they have to master it internally.Rong Rongxing, Yahoo began to artificially produce content.
Therefore, the tragedy soon happened, and Google’s technology-driven content quickly went to the point where it couldn’t do much with artificial content. Yahoo found out that Google’s search box, which has nothing at all, is the best way to help people get the most information they want most. The best way to find content and the brand in people’s minds is also sadly turned into the “content is someone else” Google box.
After the main business was hit hard, Yahoo was devastated. By 2016, Yahoo’s core assets were only $4.8 billion.
Comparatively, Baidu’s core business is also the only cash cow in Baidu’s big ecology. In the first quarter of this year, revenues increased by only 2.84% year-on-year, which has to be worrying.
Fourth, Baidu’s main business competition
A few days ago, Zhang Yiming said in an internal speech: “If there is no expansion of the search scene and high-quality content, the headline DAU may have only 40 million growth space.”
Similarly, when Baidu’s search engine bidding advertising growth was weak in the past 16 years, it was clear when the online information advertisement was launched: “If Baidu does not do information flow, after the engine advertisement cake is finished, the main business is also looking for No incremental space.”
So, in 16 years, Q4, Baidu made a headline-like information flow advertisement; in 19 years, Q1, the headline went online and searched like Baidu.
The two companies that love each other have finally become the other side.
In recent days, there have been self-media throws: “The headline is going to be Baidu in the mobile Internet era.” In fact, this statement is not accurate. Baidu did not miss the mobile Internet. In 17 years, its mobile revenue accounted for more than 73.1%. Therefore, instead of saying that the headline should be made into “Baidu in the mobile Internet era,” it is better to replace it.
Before today’s headline announced the search, domestic search engines include Sogou, Shenma Search, Bing, Haosou, etc. These companies are unable to pose a threat to Baidu search engines and information flow advertisements.
The headline search turned out to be enough to make BaiduPanic: The products of these two companies are too similar.
If the headline can be like a pangolin in its ad network, make the content “Pangolin.” Linking the traffic islands of the mobile Internet era, it may really give a fatal blow to Baidu, who is obsessed with doing “private traffic.”
So, is Baidu worth not worth investing? Looking at the balance sheet is very worth investing. But at the same time, Baidu’s basic disk is threatened, and the assumption of making 10 years of money may be deteriorating.
Author: Long An Weigong
link: https: //xueqiu.com/3203620784/131028766
Source: Snowball
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