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MODEL PORTFOLIO THE GIST
NEWS AND FEATURES
Global Philippines Fine Living
INSIGHTS
INVESTMENT STRATEGY
Economy Stocks Bonds Currencies
THE BASICS
Investment Tips Explainers Retirement
WEBINARS
2024 Mid-Year Economi Briefing, economic growth in the Philippines
2024 Mid-Year Economic Briefing: Navigating the Easing Cycle
June 21, 2024
Investing with Love
Investing with Love: A Mother’s Guide to Putting Money to Work
May 15, 2024
retirement-ss-3
Investor Series: An Introduction to Estate Planning
September 1, 2023
View All Webinars
DOWNLOADS
investment-ss-3
Reports
Policy rate views: Fed expected to do baby steps
September 18, 2025 DOWNLOAD
economy-ss-9
Economic Updates
Inflation Update: Faster but full-year average within target
September 5, 2025 DOWNLOAD
948 x 535 px AdobeStock_433552847
Reports
Monthly Economic Update: Waiting on Jay Powell
September 2, 2025 DOWNLOAD
View all Reports
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  • Baidu
Sovereign Bonds

Baidu

  • Sector: Media and TelecommunicationsTechnology
  • Sub Sector: Technology
  • Country: China
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Fundamental View

AS OF 21 Aug 2025
  • We lowered our recommendation on Baidu to Underperform from Market perform post its weak 2Q25 results; revenues contracted and EBITDA margin fell sharply due to low advertising monetization rate; free operating cash flow was negative for a second consecutive quarter, and net cash narrowed; we expect Baidu’s credit outlook to further weaken over the next 12 months and we see reduced rating headroom at Moody’s as we expect gross leverage to trend higher in 2H25 to 2.8x. We view its bonds as rich compared to A-rated China tech and Asia corporate peers; for example, Baidu trades only 3-5 bp tighter than Alibaba and Tencent, and it is 11/6 bp tighter than Asia A- and A rated corporates; as a gauge, the average spread differential is 23 bp for A3 and A1 rated Asian $ bonds.

Business Description

AS OF 21 Aug 2025
  • Founded in 2000, Baidu started out as a search engine business and began its development into artificial intelligent (AI) since 2010.
  • Baidu Core is the main revenue driver of the company (80% of 2Q25 revenues) which provides search-based, feed-based and other online marketing services (total: 50% of revenues), as well as products and services from new AI initiatives (31% of revenues); Baidu's AI initiatives include AI cloud (enterprise & public sector cloud, and personal cloud), Intelligent Group Driving (Apollo Go, Apollo auto solutions, and intelligent EVs under Jidu Auto), Mobile Ecosystem (Baidu App, ERNIE Bot, Haokan and Baidu Post), and other growth initiatives (ie. Xiaodu smart devices powered by DuerOS smart assistant and AI chips).
  • 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.
  • 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 238.4 bn as of 21 August 2025.

Risk & Catalysts

AS OF 21 Aug 2025
  • Any 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).

Key Metric

AS OF 21 Aug 2025
RMB bn FY21 FY22 FY23 FY24 LTM 2Q25
Debt to Book Cap 29.7% 28.5% 25.0% 22.5% 24.4%
Debt/Total Equity 42.2% 39.8% 33.4% 29.0% 32.2%
Debt/Total Assets 24.1% 23.4% 20.8% 18.5% 20.4%
Gross Leverage 3.3x 2.8x 2.2x 2.0x 2.5x
Interest Coverage 8.2x 11.4x 12.1x 13.8x 12.8x
EBITDA Margin 22.6% 26.8% 29.2% 29.3% 27.2%
Baidu has historically maintained a net cash position. Year-end: 31 December.
Scroll to view columns right arrow

CreditSight View Comment

AS OF 08 Sep 2025

We lower our recommendation on Baidu to Underperform from Market perform post its weak 2Q25 results; revenues contracted and EBITDA margin fell sharply due to low advertising monetization rate; free operating cash flow was negative for a second consecutive quarter, and net cash narrowed; we expect Baidu’s credit outlook to further weaken over the next 12 months and we see reduced rating headroom at Moody’s as we expect gross leverage to trend higher in 2H25 to 2.8x. We view its bonds as rich compared to A-rated China tech and Asia corporate peers; for example, Baidu trades only 2-7 bp tighter than Alibaba and Tencent, and it is 11/5 bp tighter than Asia A- and A rated corporates; as a gauge, the average spread differential is 24 bp for A3 and A1 rated Asian $ bonds.

Recommendation Reviewed: September 08, 2025

Recommendation Changed: August 21, 2025

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