Daily Investment Strategy
Daily focus：Baidu Group - SW（9888）
Baidu's first quarter 2025 results exceeded expectations, with total revenue of approximately RMB 32.45bn. Core non-online marketing revenue increased by 40% year-on-year, mainly driven by AI cloud business, driving overall core revenue to grow by 7%. Core online advertising revenue continued to decline, down about 6%. Baidu is actively promoting AI search transformation. In April, 35% of mobile searches contained AI-generated content, and this proportion is expected to exceed 50% in the second half of the year, with user activity increasing by 7%. However, AI commercialization is still in its early stages, and core advertising revenue is expected to continue to decline in the second and third quarters before gradually recovering in the fourth quarter. The cloud computing business grew strongly, with revenue increasing 42% yoy in the first quarter and non-GAAP operating profit margin increasing to the low double digits. It benefited from the release of DeepSeek R1 and the expansion of enterprise AI applications, becoming a major growth driver in the future. Overall, Baidu continues to make investments in AI and cloud computing, and its long-term prospects are promising, but its core advertising revenue still faces pressure in the short term.
U.S. Tax cut bill (One Big Beautiful Bill Act) passed
The tax cut bill, a signature initiative of Trump 2.0’s term, has passed the U.S. House of Representatives with a vote of 215 in favor and 214 against. In addition to various tax reduction measures, the bill also includes provisions to raise the debt ceiling, repeal Biden administration’s clean energy tax credits, increase military spending, and fund immigration enforcement, among others. Market participants are concerned that the measures in this bill may widen the U.S. government’s budget deficit, which is bad news for the bond market, as the attractiveness and credibility of U.S. Treasuries will gradually decline.
Southbound Stock Connect recorded a net inflow of HKD 3.88bn on Thursday. Among the stocks, China Construction Bank (0939) saw the highest net inflow at HKD 930mn, followed by Meituan (3690). Tencent (0700) recorded the highest net outflow at HKD 860mn, followed by XPeng Motors (9868).
Leung Kai Tong is a SFC licensed person accredited to KGI Group to carry on regulated activities (for details, please refer to: https://apps.sfc.https://apps.sfc.hk/publicregWeb/indi/ADU276/details). He and/or his associate do not have any financial interest in the recommended issuer or new listing applicant.
The materials contained herein are provided by KGI Asia Limited ("KGI") for information only. While such materials are based on or derived from sources believed to be reliable, KGI makes no representation or warranty (express or implied) as to their accuracy or reliability. Neither the information nor the opinions expressed herein constitute, or are to be construed as, an offer or invitation or solicitation of an offer to buy or sell any securities or investments. KGI and its officers, employees, agents and affiliates may have interests in the securities or investments covered herein and accept no liability whatsoever for any loss or consequence whatsoever (whether direct or indirect) resulting from any use of or reliance by you on such materials.
