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Baidu
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 04 Mar 2026We maintain our Underperform recommendation on Baidu following its weak 4Q25 results. Revenues fell amid the continued contraction in online ads, while EBITDA margin fell YoY due to an increased revenue mix of the lower-margin AI cloud segment and weak monetization of its search engine; gross leverage further weakened and net cash narrowed. Baidu trades in-line to Asia A corp and 9 bp tighter than Asia A- corp which we view as rich; this is because we expect its debt metrics to remain weak compared to its historical levels over the next 12-24 months given the challenging outlook of its advertising segment and weak margins of its AI cloud segment. In our view, Baidu should be trading closer to A- corps. We also think Baidu is expensive compared to BABA and TENCNT.
Business Description
AS OF 04 Mar 2026- Founded in 2000, Baidu started out as a search engine business and began its development into artificial intelligent (AI) since 2010.
- Baidu general business is the main revenue driver of the company (79% of 4Q25 revenues); this includes its AI-powered businesses (34% of 4Q25 revenues) through AI cloud infrastructure (ie. enterprise cloud), AI applications (Baidu Wenku, Baidu Drive, automonous ride-hailing via Apollo Go), and AI-native marketing services; the remaining core revenues (45% of total) are derived from its legacy business and others which includes traditional advertising services across Search, Feed and other properties.
- iQiyi accounts for the remaining revenues of Baidu; iQIYI is an online video platform with a content library that includes licensed movies, television series, cartoons, and other programs; it generate revenues through online ads and membership subscription fees.
- Baidu launched ERNIE bot in Mar-23, a generative AI chatbot powered by ERNIE, Baidu's in-house foundation model.
- Baidu has a market capitalization of RMB 284.9 bn as of 4 March 2026.
Risk & Catalysts
AS OF 04 Mar 2026Any regulatory clampdowns abroad and domestically (e.g. potential US investment ban, antitrust rules, data security and personal information protection laws) may adversely affect the business of Baidu. The interpretation of Chinese laws and regulations involves some degree of uncertainty.
There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).
Baidu has made significant investments into long-term AI-related projects, which may take time to turn profitable. A potential escalation of the US chip restriction could have a material negative impact its AI related business (ie. cloud, ernie bot, autonomous driving).
Intense competition in online ads segment may pressure topline and EBITDA margin.
Key Metric
AS OF 04 Mar 2026| RMB bn | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 29.7% | 28.5% | 25.0% | 22.5% | 26.0% |
| Debt/Total Equity | 42.2% | 39.8% | 33.4% | 29.0% | 35.1% |
| Debt/Total Assets | 24.1% | 23.4% | 20.8% | 18.5% | 21.6% |
| Gross Leverage | 3.3x | 2.8x | 2.2x | 2.0x | 3.2x |
| Interest Coverage | 8.2x | 11.4x | 12.1x | 13.8x | 10.9x |
| EBITDA Margin | 22.6% | 26.8% | 29.2% | 29.3% | 23.4% |
CreditSight View Comment
AS OF 27 Feb 2026We maintain our Underperform recommendation on Baidu following its weak 4Q25 results. Revenues fell amid the continued contraction in online ads, while EBITDA margin fell YoY due to an increased revenue mix of the lower-margin AI cloud segment and weak monetization of its search engine; gross leverage further weakened and net cash narrowed. Baidu trades in-line to Asia A corp and 9 bp tighter than Asia A- corp which we view as rich; this is because we expect its debt metrics to remain weak compared to its historical levels over the next 12-24 months given the challenging outlook of its advertising segment and weak margins of its AI cloud segment. In our view, Baidu should be trading closer to A- corps. We also think Baidu is expensive compared to BABA and TENCNT.
Recommendation Reviewed: February 27, 2026
Recommendation Changed: August 21, 2025
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Search topics about wealth insights and investments.Tencent
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 28 Nov 2025We maintain our O/P recommendation on Tencent. In 3Q25, revenues accelerated and were ahead of expectations, EBITDA margin expanded on an improved revenue mix, FOCF remained robust, debt metrics improved. We view Tencent as a core holding in China and Asia IG credits, and it is our preferred duration play. While valuations of Tencent is less compelling compared to YE24, its longer duration bonds still offer ~20 bp of spread pick up against Chinese SOEs of similar tenors. We like Tencent’s strong and improving credit outlook compared to its Chinese tech peers, rock solid balance sheet and robust free operating cash flow. We prefer its 2041 bond which offer the highest 20-35 bp spread pick up against Asia A corporate and Chinese SOEs
Business Description
AS OF 28 Nov 2025- Founded in November 1998, Tencent is a leading provider of Internet value added services in China. Since its establishment, Tencent has ventured into instant messaging, social networking, online payments, digital entertainment, and PC and smartphone gaming. Most recently, it has also forayed into high-tech areas such as artificial intelligence, and cloud computing.
- Tencent's leading Internet platforms in China include Weixin/WeChat (online messaging), QQ Instant Messenger (online messaging), Tencent Games (gaming), Tencent Video/Weixin Video Accounts (video platforms), WeChat Pay (payments), and Tencent Cloud. The combined monthly average users (MAU) of Weixin and Wechat reached 1.40 bn as of 31 March 2025.
- In 3Q25, 50% of revenues came from Value Added Services (which consist of Domestic Games, International Games, and Social Networks), 30% came from FinTech and Business Services (e.g. commercial payments and cloud), and 19% from Online Advertising.
- Tencent is currently primarily listed on the Hong Kong Stock Exchange, with a market capitalization of HKD 5.6 tn as of 27 November 2025.
Risk & Catalysts
AS OF 28 Nov 2025While Chinese regulators have adopted a more friendly stance towards tech companies, any regulatory clampdowns abroad and domestically (e.g. antitrust rules, data security, personal information protection laws) may affect Tencent’s business. Tencent’s gaming, music streaming, and online payment units are among those that have come under regulatory scrutiny in the past.
Tencent uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers, which poses regulatory risks. Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Tencent against international peers.
Key Metric
AS OF 28 Nov 2025| RMB bn | FY21 | FY22 | FY23 | FY24 | LTM 3Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 27.0% | 31.4% | 29.8% | 25.4% | 24.5% |
| Net Debt to Book Cap | 6.0% | 8.5% | 1.0% | 2.3% | 1.4% |
| Debt/Total Equity | 36.9% | 45.9% | 42.5% | 34.0% | 32.5% |
| Debt/Total Assets | 20.1% | 22.8% | 23.5% | 20.1% | 19.7% |
| Gross Leverage | 1.7x | 1.9x | 1.6x | 1.3x | 1.2x |
| Net Leverage | 0.4x | 0.5x | 0.1x | 0.1x | 0.1x |
| Interest Coverage | 24.7x | 19.0x | 19.9x | 22.5x | 24.4x |
| EBITDA Margin | 34.9% | 34.3% | 38.9% | 42.4% | 45.0% |
CreditSight View Comment
AS OF 20 Mar 2026We maintain our O/P recommendation on Tencent post its in-line and strong 4Q25 results. Topline growth remained resillient thanks to its gaming and online ads segment; EBITDA margin improved YoY on a better revenue mix and cost efficiency for cloud; FOCF was robust and debt metrics stayed modest. We expect Tencent’s debt metrics to remain stable and modest over the next 12 months. In addition, we view Tencent as a core holding in Asia IG, and we think its good hedge against US AI and expect strong technical support from Chinese accounts in an event of spread widening. TENCNT is our preferred duration play, and the longer dated-bonds of the company offer an attractive 10-45 bp spread pick up against their Asia A corporate and China A-rated SOE peers. We prefer the TENCNT 2049 bond.
Recommendation Reviewed: March 20, 2026
Recommendation Changed: August 18, 2022
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Search topics about wealth insights and investments.Alibaba
- Sector: Technology Media and Telecommunications
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 15 Sep 2025We maintain our O/P recommendation on BABA post its decent F1Q26 results; topline growth missed expectations, EBITDA margin fell 1 ppt, and FOCF turned negative; that said, gross leverage remained modest, with a strong net cash position intact. We view BABA as a core holding in China/Asia IG credits, and it is our preferred duration play. Its longer duration bonds trade ~40 bp wider than Chinese SOEs of similar tenors. In particular, we like BABA 2035. Within China tech credits, we prefer BABA over BIDU/JD, which are rated 1-2 notches lower but trade only marginally wider. We also view BABA to be more defensive compared to high beta BBB China tech credits while offering value.
Business Description
AS OF 15 Sep 2025- Founded in 1999, Alibaba is the largest retail commerce company in the world based on gross merchandise volume (GMV) as of 31 March 2023.
- The company's business segments comprise Taobao & Tmall Group (39% of F4Q25 revenue; China e-commerce incl. Taobao, Tmall, Taobao Deals, Taocaicai, 1688.com), International Digital Commerce (13%; incl. Lazada, AliExpress, Trendyol and Daraz), Cloud Intelligence Group (11%; incl. AliCloud, AI), logistic provider Cainiao (8%), Local Consumer Services (6%; incl. Ele.me, Amap), and Digital Media and Entertainment (2%, incl. Youku & Alibaba Pictures) and Others (21%; incl. Freshippo, Fliggy, Alibaba Health, Intelligent Information Platform, SunArt, DingTalk).
- Taobao/Tmall is Alibaba's core business and the main EBITA & cash generation unit of the group. Alibaba's annual active consumer exceeded 1 bn in June-2022.
- Alibaba had a market capitalization of RMB 2.7 tn as of 15 September 2025.
Risk & Catalysts
AS OF 15 Sep 2025While Chinese policymakers have adopted an increasingly friendly stance towards tech platforms, regulatory clampdown (e.g. anti-monopoly guidelines, data security laws, personal information protection laws) may still affect Alibaba as it increases compliance cost. There are regulatory risks given the corporate structure which uses variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs).
Intensifying competition amongst eCommerce platforms may result in slower topline growth and weaker EBITDA margins.
Alibaba does not control Alipay but relies on Alipay to conduct substantially all the payment processing and escrow services on its marketplaces.
US-China tension may escalate under the new Trump Administration, including additional chip sanctions, which may result in higher volatility. Failing to secure a stable supply of advanced AI chips and/(or) find domestic alternatives could weigh on the long-term AI development of Alibaba against international peers.
Key Metric
AS OF 15 Sep 2025| CNY BN | FY22 | FY23 | FY24 | FY25 | LTM F1Q26 |
|---|---|---|---|---|---|
| Debt to Book Cap | 11.6% | 12.6% | 13.3% | 17.5% | 17.5% |
| Debt/Total Equity | 13.1% | 14.4% | 15.3% | 21.2% | 21.2% |
| Debt/Total Assets | 8.3% | 9.2% | 9.7% | 12.8% | 12.6% |
| Gross Leverage | 0.9x | 0.9x | 0.9x | 1.2x | 1.2x |
| Interest Coverage | 32.2x | 29.6x | 24.0x | 20.7x | 19.9x |
| EBITDA Margin | 18.5% | 20.2% | 20.3% | 19.9% | 19.6% |
CreditSight View Comment
AS OF 20 Mar 2026We maintain our O/P recc on BABA. Topline growth due to a slowdown in eCommerce; EBITDA margin narrowed YoY; FOCF turned positive after two negative quarters; debt metrics marginally weakened, and BABA maintained a stable net cash position. We view BABA as a defensive core holding in Asia/China IG $ credits, and we like the healthy balance sheet and deep net cash of the company. We expect BABA’s debt metrics to improve over the next 12 months. In addition, we view BABA as a good hedge against US AI and expect strong technical support from Chinese accounts in an event of spread widening. Alibaba is our preferred duration play in Asia IG, and the longer dated-bonds of BABA offer an attractive 20-45 bp spread pick up against their Asia A corp & China A-rated SOE peers. We prefer BABA 2054.
Recommendation Reviewed: March 20, 2026
Recommendation Changed: August 05, 2022
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Search topics about wealth insights and investments.JD.com
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 21 Aug 2025We maintain our M/P recommendation on JD post its weak 2Q25 results; topline growth was a strong beat, but EBITDA margin materially narrowed due to hefty spending for its food delivery business; FOCF also contracted and gross debt metrics weakened, but JD still retained a strong net cash position. JD trades largely in-line to Asia A- corp which we view as fair; while we expect JD’s gross debt metrics to temporarily weaken over 2H25 due to its hefty investments into food delivery, we do not expect downgrade risk for the credit given the strong performance of its core retail and logistic segments, and we expect JD to still maintain a strong net cash position over the 12 months. Amongst the A-rated China tech credits, we continue to prefer Alibaba and Tencent.
Business Description
AS OF 21 Aug 2025- JD is one of China's leading e-commerce and retail infrastructure service providers.
- JD has a large fulfillment infrastructure which includes over 1,600 warehouses operated by the company, and 2,000 cloud warehouses operated by third-party warehouse owner-operators under JD Logistics Open Warehouse Platform. Its warehouse network had an aggregate gross floor area of approximately over 32 mn square meters, as of 31 December 2024.
- JD has 3 operating segments, namely (1) JD Retail (82% of 2Q25 revenues), which includes JD Health and JD Industrials, and the segment mainly engages in online retail, online marketplace and marketing services in China; (2) JD Logistics (14%) which includes both internal and external logistic businesses; and (3) New businesses (4%) which consist of food delivery, Dada, JD Property, Jingxi and overseas businesses.
- JD had a market capitalization of RMB 325.1 bn as of 21 Aug 2025.
Risk & Catalysts
AS OF 21 Aug 2025While Chinese regulators have adopted a friendlier stance towards tech companies, any regulatory clampdowns may still adversely affect the business of JD (e.g. antitrust rules, data security & personal data protection laws).
Intensifying competition amongst Chinese eCommerce platforms with the entrance of new live-streaming/short-form video platforms and group buying discount platforms may result in slower topline growth and weaker EBITDA margin for JD as its increase its user/merchant incentives and promotional activities to defend its market share.
There are regulatory risks involving the use of variable interest entities (VIEs) to circumvent China’s restrictions on foreign ownership of Internet Content Providers (ICPs). Specifically, VIE transactions involving “change in control” will be subject to antitrust regulatory processes.
Key Metric
AS OF 21 Aug 2025| RMB mn | FY21 | FY22 | FY23 | FY24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 12.2% | 19.2% | 18.8% | 22.3% | 25.3% |
| Debt/Total Equity | 13.8% | 23.7% | 23.1% | 28.7% | 33.9% |
| Debt/Total Assets | 6.9% | 10.9% | 10.9% | 12.9% | 14.3% |
| Gross Leverage | 1.8x | 1.9x | 1.5x | 1.7x | 2.2x |
| Interest Coverage | 16.1x | 16.3x | 15.5x | 18.5x | 16.2x |
| EBITDA Margin | 2.0% | 3.3% | 4.1% | 4.6% | 3.6% |
CreditSight View Comment
AS OF 01 Apr 2026We maintain our Underperform recommendation on JD following its poor 4Q25 results. Topline growth decelerated on a high base for its home appliance/electronics segment, EBITDA turned negative due to hefty new business losses; FOCF fell YoY and debt metrics materially weakened. We expect JD’s debt metrics to improve in FY26 from a low base, but it remains weak compared to historical levels. JD trades 3/8 bp tighter than Asia A/A- corporates, ~10 bp tighter than Alibaba, and it is only 4 bp wider than Tencent; this is much tighter than average spread differential of 21 bp for A3 and A1 Asia $ bonds. We think JD’s spreads should be trading closer to Asia A- corporates; in addition, we see reduced rating headroom for JD with potential negative outlook revision by S&P and Moody’s
Recommendation Reviewed: April 01, 2026
Recommendation Changed: September 05, 2025
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