UOB Kay Hian (Hong Kong) Limited
22 May 2025
Greater China Market Insights: Baidu and XPeng Beat Expectations, Trading Strategies, and Key Sector Updates
Executive Summary
UOB Kay Hian’s latest Greater China Daily delivers an in-depth look at the region’s top performers and emerging opportunities, spotlighting Baidu Inc. and XPeng Inc. for their robust quarterly results. The report further explores trading ideas in the Hong Kong market, macroeconomic indicators, and the near-term outlook for key sectors. Here’s a comprehensive breakdown for investors and market watchers.
Market Overview and Key Indices
Major regional and global indices showed mixed performance. The Hang Seng Index (HSI) closed at 23,827.8, up 0.6% in the previous session, marking a strong 10.5% gain over the past month and 18.8% year-to-date. The Hang Seng China Enterprises Index (HSCEI) followed suit, up 0.8% on the day and 18.8% YTD. In contrast, the Dow Jones Industrial Average (DJIA) and S&P 500 saw slight declines, while the CSI 300 posted a modest 0.5% daily gain.
| Index |
Prev Close |
1D % |
1W % |
1M % |
YTD % |
| DJIA |
41,860.4 |
-1.9 |
-0.5 |
9.7 |
-1.6 |
| S&P 500 |
5,844.6 |
-1.6 |
-0.8 |
13.3 |
-0.6 |
| HSI |
23,827.8 |
0.6 |
0.8 |
10.5 |
18.8 |
| HSCEI |
8,660.9 |
0.8 |
0.8 |
8.9 |
18.8 |
| CSI 300 |
3,916.4 |
0.5 |
-0.7 |
3.5 |
-0.5 |
Top trading turnover was seen in SMIC, JD-SW, HKEX, NetEase Inc, and Geely Automobile. Shandong Hi-Speed, Zhongsheng Group, Zijin Mining-H, Anta Sports, and China Literature led the gainers, while Budweiser Brewing, ZTO Express, China Hongqiao, Haidilao International, and Tongcheng Travel topped the losers’ list.
Baidu Inc. (HKEX: 9888) – AI Cloud Powering a Solid Earnings Beat
Overview & Shareholder Structure
- Current Rating: HOLD (Maintained)
- Share Price: HK\$86.10
- Target Price: HK\$91.00 (Upside: +5.7%)
- Market Cap: HK\$241.5 billion (US\$30.8 billion)
- Major Shareholders: BlackRock Inc (6.6%), BBH & CO (4.8%), Vanguard Group Inc (4.1%)
1Q25 Financial Highlights
- Revenue: RMB32.5 billion (+3% YoY), 5% above consensus
- Gross Margin: 46.1% (down 5 ppt YoY)
- Non-GAAP Operating Profit: RMB5.3 billion (-20% YoY)
- Non-GAAP Net Profit: RMB6.5 billion (-8% YoY), beating consensus
| Metric |
1Q24 |
4Q24 |
1Q25 |
QoQ % |
YoY % |
| Total Net Revenue (RMBm) |
31,513 |
34,124 |
32,452 |
-5 |
3 |
| Gross Margin (%) |
51.5 |
47.2 |
46.1 |
-1ppt |
-5ppt |
| Non-GAAP Net Income (RMBm) |
7,011 |
6,709 |
6,469 |
-4 |
-8 |
| Non-GAAP Net Margin (%) |
22.2 |
19.7 |
19.9 |
0ppt |
-2ppt |
Key Operating Insights
- Revitalised Top-Line Growth: Baidu Core revenue accelerated to +7% YoY, reaching RMB25.5 billion, with AI-powered ads and cloud revenue offsetting weak retail advertising.
- AI Cloud Momentum: AI Cloud revenue soared 42% YoY to RMB6.6 billion, now accounting for 26% of Baidu Core revenue, up from 20% a year ago. GenAI-related revenue saw triple-digit YoY growth, and non-GAAP operating margin for AI Cloud reached the low teens.
- AI Penetration: 35% of Baidu’s search results are now AI-generated, up from 32% at the start of the year. Baidu App MAUs reached 724 million (up 7% YoY).
- Recurring Revenue: Subscription-based revenue is now the primary driver for Baidu’s enterprise cloud business.
Profitability and Margins
- Gross Margin: Fell due to AI Cloud’s lower margin profile.
- Operating Margin: 16%, down 5 ppt YoY, largely due to investments in Ernie Bot.
- R&D Costs: Down 12% YoY; S&M expenses up 9% YoY.
Strategic and Operational Developments
- AI Chip Export Restrictions: Baidu reports minimal impact, leveraging domestic chips and a four-layer AI architecture for high GPU utilization and cost efficiency.
- Apollo Go Autonomous Driving: 1.4 million rides in 1Q25 (+75% YoY), surpassing 11 million cumulative rides. Expanded to Dubai and Abu Dhabi, with open-road validation and a strategic partnership with CAR Inc. for autonomous vehicle rentals.
- iQiyi Segment: Revenue fell 9% YoY due to declines in advertising and membership revenue. Operating margin dropped to 4.8%.
- Share Repurchases: US\$445 million returned to shareholders in 1Q25; cumulative buyback at US\$2.1 billion (7% of market cap).
Earnings Outlook and Risks
- Upgraded Forecasts: 2Q25/2025 revenue forecasts raised by 2%, net profit forecast lifted by 1%/12% respectively due to GenAI growth.
- Risks: Weak advertising market, uncertainties in autonomous driving, and US chip export bans.
Valuation and Recommendation
- Rating: HOLD
- Target Price: HK\$91.00 (raised from HK\$84.00)
- Implied 2025F PE: 8x (current: 7.8x, historical mean: 14.5x)
- Catalysts: Market share gains in AI cloud and autonomous driving, improved monetisation across business units, increased synergies between core and new initiatives.
Key Financials Table (RMBm)
| Year Ending Dec 31 |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover |
134,598 |
133,125 |
141,106 |
149,614 |
158,005 |
| EBITDA |
29,246 |
28,114 |
24,899 |
24,560 |
28,481 |
| Net Profit (Adj) |
28,747 |
27,002 |
29,497 |
28,229 |
31,724 |
| EPS (Fen) |
1,009.6 |
965.0 |
1,033.3 |
979.1 |
1,089.4 |
| PE (x) |
7.8 |
8.2 |
7.7 |
8.1 |
7.3 |
| Net Margin (%) |
16.0 |
18.2 |
17.9 |
15.4 |
17.0 |
XPeng Inc. (HKEX: 9868) – Turning the Corner with Record Deliveries, Margins, and Global Expansion
Overview & Shareholder Structure
- Current Rating: BUY (Maintained)
- Share Price: HK\$77.55
- Target Price: HK\$150.00 (Upside: 93.4%)
- Market Cap: HK\$146.3 billion (US\$18.8 billion)
- Major Shareholder: He Xiaopeng (20.4%)
1Q25 Financial Performance
- Revenue: RMB15.81 billion (+141% YoY, -2% QoQ)
- Net Loss: RMB664 million (record low, -51% YoY, -50% QoQ)
- Deliveries: 94,008 vehicles (+331% YoY), driven by Mona M03 and P7+
- ASP: RMB153,000 (down 40% YoY as cheaper models gained share)
- Gross Margin: 15.6% (record high, +2.7 ppt YoY, +1.1 ppt QoQ)
| Metric |
1Q25 |
YoY Change (%) |
QoQ Change (%) |
2025F |
YoY Change (%) |
| Deliveries (‘000 units) |
94.0 |
330.8 |
2.8 |
400.0 |
110.5 |
| ASP (RMB’000/unit) |
153 |
-39.8 |
-4.7 |
160.3 |
-15.0 |
| Net Profit per Vehicle |
(7.1) |
-88.7 |
-51.4 |
(4.0) |
-86.9 |
| Gross Margin (%) |
15.6 |
2.7 |
1.1 |
15.9 |
1.6 |
| Net Margin (%) |
-4.2 |
16.7 |
4.1 |
-2.2 |
11.9 |
Growth Drivers and Segment Insights
- Service Revenue: Grew 44% YoY to RMB1.44 billion, bolstered by the Volkswagen partnership.
- Vehicle Sales Revenue: Climbed 159% YoY to RMB14.37 billion.
- Gross Margin by Segment: New-vehicle sales margin hit a record 10.5% (+5 ppt YoY); services margin reached 66.4% (+12.4 ppt YoY).
- Expense Ratios: SG&A/revenue and R&D/revenue ratios dropped by 8.9 ppt and 8.1 ppt respectively, reflecting operating leverage from higher sales.
Strategic Roadmap and Outlook
- Turnaround Target: Company expects to achieve breakeven in 4Q25 and a net profit from 1Q26 onward.
- 2025 Guidance: Deliveries estimated at 400,000 units, with 2Q25 guided at 102,000–108,000 units and revenue of RMB17.5–18.7 billion.
- Margin Outlook: Gross margin expected to improve, aiming for 15.9% in 2025, 17.2% in 2026, and 18.3% in 2027 as premium models increase and scale improves.
Product Pipeline and Technology Initiatives
- New Models in 2025:
- Mona M03 Max (28 May 2025): First RMB150,000-class model with Turing AI-assisted driving.
- G7 (June 2025): RMB250,000 smart SUV.
- New P7 (3Q25): RMB300,000 luxury sports sedan.
- Kunpeng Super EV (4Q25): Dual-mode (BEV/PHEV) targeting global markets.
- Tech Upgrades: All models to adopt in-house Turing Chips (3–7x industry-leading computing power) and aim for L3/L4 autonomous driving leadership by 2026.
- Global Expansion: Focused on Europe (UK), Southeast Asia (Indonesia), and planning to enter Latin America and other Asian markets. Sales coverage to double from 30 to 60 countries in 2025, supported by 300 new service stations.
Financial Forecasts and Key Metrics
| Year Ending Dec 31 |
2023 |
2024 |
2025F |
2026F |
2027F |
| Net Turnover (RMBm) |
30,676 |
40,866 |
71,167 |
87,260 |
110,406 |
| EBITDA (RMBm) |
(8,782) |
(4,439) |
188 |
3,079 |
8,215 |
| Net Profit (Adj) (RMBm) |
(10,376) |
(5,790) |
(1,591) |
1,098 |
5,273 |
| EPS (fen) |
(549.9) |
(306.9) |
(84.3) |
58.2 |
279.5 |
| Net Margin (%) |
(33.8) |
(14.2) |
(2.2) |
1.3 |
4.8 |
| ROE (%) |
(28.3) |
(17.1) |
(5.2) |
3.6 |
15.8 |
Valuation and Recommendation
- Rating: BUY
- Target Price: HK\$150.00
- Valuation Basis: 10-year DCF (WACC: 16.5%, terminal growth: 4%), implying 50x 2027F PE and 2.4x 2027F P/S.
- Catalysts: Strong weekly/monthly sales, robust order flows for new models, and strong quarterly results.
Traders’ Corner: Tactical Ideas for the Hong Kong Market
Aluminum Corporation of China Limited (HKEX: 2600)
- Trading Buy Range: HK\$4.80–4.84
- Target Price: HK\$5.15 / HK\$5.40
- Protective Stop: Below HK\$4.43
- 2024 Results: Revenue up 14.0% YoY to RMB55.78 billion; net profit surged 58.8% YoY to RMB3.54 billion
- Dividend Yield: 5.0%
- Technical: Stock filled a major downward gap, reclaimed 50- and 100-day moving averages, with momentum signals strengthening.
Akeso, Inc. (HKEX: 9926)
- Trading Buy Range: HK\$88.00–88.80
- Target Price: HK\$92.70 / HK\$95.80
- Protective Stop: Below HK\$82.20
- Key News: Ivonescimab, developed for non-small cell lung cancer, received first-line marketing approval in China.
- Technical: Found support at 50-day MA; rebounded above 10- and 20-day MAs; momentum strengthening as RSI rises and MACD signals turn bullish.
Macro and Economic Calendar
- 22 May: Hong Kong April CPI Composite
- 26 May: Hong Kong April Trade Balance, Exports, Imports
- 27 May: China April Industrial Profits
- 30 May: China May NBS PMI; Hong Kong April Money Supply
Key Assumptions for Regional GDP and Commodities
| Region |
2024 GDP (%) |
2025F GDP (%) |
2026F GDP (%) |
| US |
2.8 |
1.8 |
2.5 |
| Euro Zone |
0.7 |
0.9 |
1.2 |
| Japan |
0.1 |
1.0 |
1.5 |
| Singapore |
4.4 |
2.5 |
1.8 |
| Malaysia |
5.1 |
4.7 |
4.8 |
| Thailand |
2.5 |
2.9 |
3.0 |
| Indonesia |
5.0 |
5.2 |
5.3 |
| Hong Kong |
2.5 |
2.2 |
2.5 |
| China |
5.0 |
4.2 |
4.2 |
- CPO (RM/mt): 2024: 4,180; 2025F: 4,500; 2026F: 4,000
- Brent Crude (US\$/bbl): 2024: 80.0; 2025F: 70.0; 2026F: 67.0
Conclusion
This comprehensive update from UOB Kay Hian offers valuable insights for investors focused on Greater China. Baidu’s AI-driven growth and XPeng’s EV turnaround signal powerful trends in technology and mobility, while tactical trading ideas offer actionable opportunities. Keep an eye on upcoming macro data and earnings catalysts to stay ahead in a dynamic and rapidly evolving market.
