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Sector: Media and Telecommunications
JD.com
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain our Market perform recommendation on JD post its 4Q24 results, where it reported a pick up in topline growth, better EBITDA margin, higher FOCF and improving debt metrics; We expect JD’s debt metrics to improve over the next 12 months as the JD Home Appliance Trade-In Alliance program and expanding supermarket category supports topline growth and a continued expansion of the higher-margin 3P sales and better product mix result in better EBITDA margin; we expect JD to cover its increased shareholder rewards with free operating cash flow. We think its positive credit outlook over the next 12 months has been largely priced in given that JD’s $ bond trades largely in-line with Asia A- corporates; we see better value in BABA and TENCNT.
Business Description
AS OF 29 Apr 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 2023.
- JD has 3 operating segments, namely (1) JD Retail (84% of 4Q24 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 (1%) which consist of Dada, JD Property, Jingxi and overseas businesses.
- JD had a market capitalization of RMB 345.5 bn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 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 29 Apr 2025| RMB mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 12.5% | 12.2% | 19.2% | 18.8% | 22.3% |
| Debt/Total Equity | 14.2% | 13.8% | 23.7% | 23.1% | 28.7% |
| Debt/Total Assets | 7.5% | 6.9% | 10.9% | 10.9% | 12.9% |
| Gross Leverage | 1.4x | 1.8x | 1.9x | 1.5x | 1.7x |
| Interest Coverage | 20.1x | 16.1x | 16.3x | 15.5x | 18.5x |
| EBITDA Margin | 3.0% | 2.0% | 3.3% | 4.1% | 4.6% |
CreditSight View Comment
AS OF 07 Mar 2025We maintain our Market perform recommendation on JD post its 4Q24 results, where it reported a pick up in topline growth, better EBITDA margin, higher FOCF and improving debt metrics; We expect JD’s debt metrics to improve over the next 12 months as the JD Home Appliance Trade-In Alliance program and expanding supermarket category supports topline growth and a continued expansion of the higher-margin 3P sales and better product mix result in better EBITDA margin; we expect JD to cover its increased shareholder rewards with free operating cash flow. We think its positive credit outlook over the next 12 months has been largely priced in given that JD’s $ bond trades largely in-line with Asia A- corporates; we see better value in BABA and TENCNT.
Recommendation Reviewed: March 07, 2025
Recommendation Changed: November 21, 2022
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
How may we help you?
Search topics about wealth insights and investments.Baidu
- Sector: Media and TelecommunicationsTechnology
- Sub Sector: Technology
- Country: China
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Fundamental View
AS OF 29 Apr 2025We maintain M/P on Baidu post its in-line 4Q24 results; the contraction in Baidu’s revenues were less than feared thanks to its AI-cloud business, which partially offset the weaknesses in the online marketing and iQiyi segments. EBITDA margin fell and FOCF contracted YoY; debt metrics marginally weakened and net cash contracted. We expect Baidu’s revenue to turnaround in FY25 and EBITDA margin to improve on recovering advertising revenues and the continued strength in its AI cloud business; we forecast its FOCF to expand, but we do not expect the company to significantly reduce its gross debt as the bulk of FOCF would be used for share buybacks. We continue to prefer Alibaba and Tencent over Baidu among A-rated China Tech. For investors looking for exposure in Baidu, we prefer its 2028s.
Business Description
AS OF 29 Apr 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 (79% of 3Q24 revenues) which provides search-based, feed-based and other online marketing services (total: 56% of 3Q24 revenues), as well as products and services from new AI initiatives (23% 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 226.5 bn as of 29 April 2025.
Risk & Catalysts
AS OF 29 Apr 2025Any 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 29 Apr 2025| RMB bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 30.4% | 29.7% | 28.5% | 25.0% | 22.5% |
| Debt/Total Equity | 43.8% | 42.2% | 39.8% | 33.4% | 29.0% |
| Debt/Total Assets | 24.8% | 24.1% | 23.4% | 20.8% | 18.5% |
| Gross Leverage | 2.7x | 3.3x | 2.8x | 2.2x | 2.0x |
| Interest Coverage | 9.8x | 8.2x | 11.4x | 12.1x | 13.7x |
| EBITDA Margin | 28.5% | 22.6% | 26.8% | 29.2% | 29.1% |
CreditSight View Comment
AS OF 19 Feb 2025We maintain M/P on Baidu post its in-line 4Q24 results; the contraction in Baidu’s revenues were less than feared thanks to its AI-cloud business, which partially offset the weaknesses in the online marketing and iQiyi segments. EBITDA margin fell and FOCF contracted YoY; debt metrics marginally weakened and net cash contracted. We expect Baidu’s revenue to turnaround in FY25 and EBITDA margin to improve on recovering advertising revenues and the continued strength in its AI cloud business; we forecast its FOCF to expand, but we do not expect the company to significantly reduce its gross debt as the bulk of FOCF would be used for share buybacks. We continue to prefer Alibaba and Tencent over Baidu among A-rated China Tech. For investors looking for exposure in Baidu, we prefer its 2028s.
Recommendation Reviewed: February 19, 2025
Recommendation Changed: August 31, 2022
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group
How may we help you?
Search topics about wealth insights and investments.PLDT
- Sector: Media and TelecommunicationsTechnologyTechnology Media and Telecommunications
- Sub Sector: Telecommunications
- Country: Philippines
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Fundamental View
AS OF 17 Mar 2025PLDT’s FY24 results were stable as expected; we see a modestly improving FY25 credit outlook aided by resilient EBITDA growth and residual PHP 11 bn of tower sales, which could offset persisting high capex.
A potential stake sale of the data center business could drive further deleveraging.
While the spillover of a PHP 33 bn capex overrun to FY25 could weigh on free cash flows, we draw mild comfort that it was likely not due to fraud but rather a management misstep.
Business Description
AS OF 17 Mar 2025- PLDT is a leading telecom operator in the Philippines, competing alongside its main rival Globe Telecom in a predominant duopoly.
- PLDT provides 2G/3G/4G mobile, fixed-line, broadband, enterprise data, and other digital services to retail and corporate customers.
- PLDT operates through 2 main business segments – “Wireless Services” and “Fixed Line Services”.
- Its “Wireless” segment offers mobile voice, mobile SMS, mobile data and mobile broadband services to retail customers in the Philippines. These services are marketed under the “Smart Postpaid”, “Smart Prepaid”, "Sun Postpaid" and “TNT Prepaid” brands.
- Its “Fixed Line Services” segment provides fixed line voice, corporate data and home broadband services to retail and corporate customers in the Philippines.
- PLDT commercially launched 5G services on a small-scale basis in Jul-2020. It currently has over 3,000 5G sites nationwide.
- PLDT maintains dominant market shares in the mobile, fixed line voice, and the home broadband spaces.
- PLDT is backed by three established corporate groups, namely First Pacific (~15% stake), NTT Corporation (~12% stake) and JG Summit Holdings (~7% stake).
Risk & Catalysts
AS OF 17 Mar 2025Aggressive expansion by new entrant DITO over the next 2-4 years could chew away at PLDT’s market share and restrain recoveries in average revenues per user (ARPU).
PLDT incurs significant capex that has restrained improvements in its leverage metrics and free cash flows. This is worsened by a recent capex overrun that has induced mild corporate governance uncertainties (though these have eased in recent months).
Consistently high dividend payouts could worsen PLDT’s already negative free cash flows.
PLDT is exposed to $/PHP depreciation risks ($300 mn 2050 bond is fully unhedged).
Key Metric
AS OF 17 Mar 2025| PHP bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 67.0% | 68.3% | 71.9% | 73.3% | 74.2% |
| Net Debt to Book Cap | 55.9% | 62.3% | 65.7% | 69.3% | 72.0% |
| Debt/Total Equity | 202.9% | 215.2% | 256.2% | 273.9% | 287.5% |
| Debt/Total Assets | 42.2% | 43.8% | 46.8% | 49.6% | 53.8% |
| Gross Leverage | 2.7x | 2.8x | 2.9x | 2.9x | 3.0x |
| Net Leverage | 2.2x | 2.6x | 2.7x | 2.8x | 2.9x |
| Interest Coverage | 7.8x | 8.1x | 7.4x | 6.5x | 6.1x |
| EBITDA Margin | 50.4% | 50.7% | 48.7% | 49.1% | 51.1% |
CreditSight View Comment
AS OF 17 Mar 2025We have a Market perform recommendation on PLDT and would avoid its 2050 bond. PLDT 2031 trades fairly to Globe 2030, Axiata 2030, and Bharti 2031. We do not like the PLDT 2050 that provides a low spread pickup of just 4 bp wider versus the PLDT 2030. We are comfortable with PLDT’s sturdy credit profile aided by a resilient broadband business and tower sales, cushioning high capex and dividends. A minority stake sale of its data center business is also credit positive. Corporate governance fears have also eased post its capex overrun in end-2022. We are watchful of strong competition in the mobile space due to DITO’s ramp up.
Recommendation Reviewed: March 17, 2025
Recommendation Changed: May 31, 2022
Who We Recommend
International Container Terminal Services Inc
BDO Unibank
Woori Financial Group