Why buy Baidu Inc (ADR)(NASDAQ:BIDU) for USD 235/50 ?

Baidu (NASDAQ: BIDU) is  currently the largest search engine in China that dominates the industry with a market share of over 60%. Headquartered in Beijing, Baidu is one of the "Big Three" technology giants in China, the other two being Alibaba and Tencent.

• Sound financial standing based on DCF analysis.
• Increasingly diversified business portfolio helps company maintain revenue growth.

• BIDU's revenue in 2014 was $7,823,336.20 (exchange rate: USD/CNY)
• Operating income (EBIT) was $2,042,067.62 in 2014, operating margin 26.1%
• Mobile revenue in 2014Q4 rose to 42% from 36% in 2014Q3
• A strong mobile performance gives BIDU an advantage in future topline growth
• Our valuation yielded a share price of $288.64 in the base case, $368.33 in the upside case and $208.55 in the downside case

 Performance

Since going public in the US in 2005, BIDU has generated a return of 2434.57% over the ten years. BIDU has rallied 26.99% in the past year. It has outperformed both the Nasdaq composite index and the S&P 500 index, which grew 15.18% and 11.96% respectively.

Valuation

Our Discounted Cash Flow valuation model yielded a share price of $288.64 in the base case, $368.33 in the upside case and $208.55 in the downside case. The base case assumes a revenue growth rate of 32.6% over the next 10 years, the upside case a growth rate of 37.98%, the downside case 25.45%.

• Baidu is currently diversifying its business portfolio. It teamed up with commercial giant Wanda Group to establish a new e-commerce enterprise in China.
• Baidu has been trying to enter the international search engine industry. Last year, it opened its first foreign language search website in Brazil using Portuguese.

• Baidu has invested heavily in the development of its mobile search platform
• It has joined many other competitors in China to develop smart phone games in order to attract more users to its platform. The effect remains to be seen.

• Increasingly focused on its mobile advertisement to monetize its customers
• Joined the online video streaming industry with its website iQiyi, which purchases the right to stream popular TV shows from the China, the US and Korea within Mainland China. The online video streaming industry is very lucrative, as advertisements will be streamed before each episode of the show.

 Vtrade capital Services recommend buying Baidu at present level for USD 234/50 by 3rd quarter  this year