Yamato: Reiterate Buy rating on BIDU-SW (09888) and optimistic about Kunlun Chip's spin-off bringing revaluation opportunities.

Daiwa issued a research report stating that BIDU-SW (09888) fourth quarter revenue met expectations, and profit performance was better than expected, mainly benefiting from cost control driving gross margin improvement. Management revealed that the plan to spin off Kunlun Core is still progressing, and Daiwa believes it will be a short-term catalyst for valuation. According to the bank's calculation, Kunlun Core's implied equity value per share is already equivalent to about half of Baidu's latest market value, anticipating a significant revaluation opportunity. Daiwa pointed out that Baidu Cloud business growth is slowing down, but revenue structure continues to improve, with subscription-based revenue from AI high-performance computing facilities growing by 143% year-on-year in the last quarter. They believe profitability has strengthened, reiterating a "buy" rating with a target price raised from HK$171 to HK$175.