Baidu, Inc.

BIDU Details

Baidu, Inc. (NASDAQ: BIDU) is the most popular search engine in China, accounting for 75% of the global search engine market in March 2021, as per StatCounter. ­The sale of pay for performance (P4P) online and other marketing services are the primary source of revenue for BIDU. It also has a technology business with artificial intelligence (AI) technology investments like self-driving cars, marketing and enterprise clouds, smart transportation, and AI chips. As of August 10, 2021, the company has 353.61 million American Depository Shares (ADS) listed and outstanding (each ADS representing eight Class A ordinary shares).

Launching Autonomous Minibus: The company rolled out Apolong II, a new multi-purpose driverless minibus in Guangzhou Huangpu District, on August 6, 2021. Apolong II is driven by advanced autonomous driving technologies without a steering wheel and will be used in public parks, airports, business districts, and residential areas.

Carbon Neutral by 2030: On June 22, 2021, Baidu declared its goal to become carbon neutral by 2030. It employs systematic methods based on existing green initiatives regarding Scope I and II of the Greenhouse Gas Protocol for this purpose.

Q1FY21 Results: The company's total revenues increased 24.80% to RMB 28.13 billion in Q1FY21 (ended March 31, 2021) from RMB 22.55 billion in Q1FY20. Its net income increased to RMB 25.03 billion in Q1FY21 vs. a net loss of RMB 1.68 billion in Q1FY20. BIDU's cash and cash equivalents (including short-term investments) totaled RMB 162.34 billion as of March 31, 2021, with a total debt of RMB 75.77 billion.

Key Risks: BIDU relies heavily on third-party manufacturers for its Xiaodu smart products. If BIDU and these suppliers fail to agree on adequate capabilities or capacity on reasonable terms, it may harm the brand's image, its cash flows, and operations. Further, BIDU operates primarily in China, where the tech business has seen a lot of growth. The Chinese authorities' recent crackdown on its US-listed Tech businesses and the consequential possibility of stricter rules could dent its operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities are unable to satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Outlook: For Q2FY21, the company anticipates revenue of RMB 29.7 to 32.5 billion, representing a 14 to 25% YoY growth, assuming Baidu Core revenue will grow by 20 to 33% YoY.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BIDU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: BIDU's share price fell 43.74% in the past six months and is currently trading in the lower-band of the 52-week range of USD 115.59 to USD 354.82. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 41.11. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 202.37. Considering the company's track record, positive outlook, robust topline, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 166.00, down 0.32% as of August 10, 2021, at 12:02 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Archer-Daniels-Midland Company

ADM Details

Archer-Daniels-Midland Company (NYSE: ADM) is a global leader in human and animal nutrition and a leading agricultural origination and processing company. It transports agricultural goods using its extensive worldwide asset base with connections to markets in over 200 countries. In addition, it also processes corn, oilseeds, and wheat into food, animal feed, chemicals, and energy products. Its three reportable business segments are Ag Services & Oilseeds, Carbohydrate Solutions, and Nutrition. As of August 10, 2021, its market capitalization stood at USD 33.87 billion.