TLTP
\nHONG KONG
\nMoody\u2019s Investors Service has affirmed Baidu Inc\u2019s A3 issuer and senior unsecured ratings, and has revised the rating outlook to stable from positive.
\n\u201cThe rating affirmation reflects Baidu\u2019s demonstrated ability to recover from temporary business disruptions, its improved debt leverage and excellent liquidity position, which reflect its prudent financial policies,\u201d said Lina Choi, a Moody\u2019s Senior Vice President.
\n\u201cMeanwhile, the rating outlook was changed to stable as we believe its management remains committed to a credit profile consistent with the company\u2019s A3 ratings and prefers to retain its excess financial capacity and balance sheet flexibility,\u201d added Choi.
\nBaidu\u2019s A3 issuer rating reflects the company\u2019s position as the leading Chinese-language internet search engine and one of the largest providers of online advertising services in China.
\nThe rating also considers Baidu\u2019s steady free cash flow, disciplined acquisitions and demonstrated ability to recover from temporary business challenges.
\nHowever, Baidu\u2019s rating is constrained by China\u2019s competitive internet market, increasing acquisition risks related to the company\u2019s efforts to build an artificial intelligence- (AI) powered platform, and potential reputational risks associated with its deconsolidated financial service business, Du Xiaoman Financial. Baidu has been a minority shareholder of Du Xiaoman since April 2018.
\nMoody\u2019s expects that the resumption of economic activities as China gains control of the coronavirus pandemic will benefit the online advertising industry and Baidu. The company has since 2017 developed a number of AI-enhanced products and services and, as a result, will continue to generate stable revenue and cash flow growth around 5.0%-7.0% per annum in the next 12-18 months.
\nAdditionally, if Baidu completes its acquisition of YY.com as scheduled, Moody\u2019s estimates it will bring an additional RMB10-12 billion in revenue and RMB3-3.5 billion in EBITDA, on a fully consolidated basis.
\nBaidu\u2019s profit margins and earnings have recovered steadily from a brief period of heavy investment in new business initiatives in H1 2019, driven by the gradual monetization of new initiatives such as its cloud and AI-enhanced newsfeed, and prudent cost-control measures. Nevertheless, the company will need to continue investing in its new products and strengthening user stickiness. As a result, Moody\u2019s expects Baidu\u2019s adjusted EBITDA margin will decline moderately from 39.8% for the 12 months ended 30 September 2020.
\nThe company has several ongoing projects that will require investment, which along with its new shareholder-return requirements, underscore its management\u2019s preference for financial flexibility.
\nIts new AI-related products and services, such as autonomous driving, AI Cloud and DuerOS voice assistant, are still in the early development and fast growth phases, while iQiyi, Baidu\u2019s fully consolidated online video subsidiary, will require heavy investment for content creation and acquisition.<\/p>\n","protected":false},"excerpt":{"rendered":"
TLTP HONG KONG Moody\u2019s Investors Service has affirmed Baidu Inc\u2019s A3 issuer and senior unsecured ratings, and has revised the rating outlook to stable from positive. \u201cThe rating affirmation reflects Baidu\u2019s demonstrated ability to recover from temporary business disruptions, its improved debt leverage and excellent liquidity position, which reflect its prudent financial policies,\u201d said Lina […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":["post-163913","post","type-post","status-publish","format-standard","category-business"],"yoast_head":"\n