China Stock Exchange opens a new round of earnings season: BAT accelerates its division and "Wei Zexi" hits Baidu hard

Against the background of the sluggish stock prices of China Stock Exchange and the return to A-shares, some companies are also afraid of the wind and rain and choose to go out to sea. With the release of financial reports from Internet companies such as Alibaba, Baidu, and Sohu, China Stock Exchange has launched a new round of financial reports season.

Original title: China Stock Market Third Quarterly Report PK: BAT accelerates differentiation Baidu experienced negative growth for the first time

. Against the background of the sluggish stock prices of China Stock Market and the return to A-shares, some companies are also afraid of the wind and rain and choose to go out to sea.

With the release of financial reports from Internet companies such as Alibaba, Baidu, and Sohu, China Stock Exchange has launched a new round of financial reports season.

On the evening of November 2, Alibaba Group announced its financial report for the second quarter of fiscal year 2017 (July 1 to September 30, 2016). The group's revenue in the quarter increased by 55% year-on-year to 34.292 billion yuan; Core e-commerce business revenue increased by 41% year-on-year to 28.493 billion yuan; mobile monthly active users increased by 23 million to 450 million yuan in a single quarter.

The fierce competition in the industry has also polarized the financial reports of Internet companies. Baidu, another giant that focuses on search, has a less than ideal report card. On October 28, Baidu released its unaudited third-quarter financial report showing that Baidu's net profit increased by 9.2%, and total revenue was 18.253 billion yuan (approximately US$2.737 billion), down 0.7% from the same period in 2015.

The established portal Sohu suffered huge losses. The company's unaudited financial report for the third quarter of 2016 showed that Sohu's third-quarter revenue was US$411 million, a year-on-year decline of 21%, and a net loss of US$65 million. Its Sogou revenue was US$166 million, a year-on-year increase of 2% and a month-on-month decrease of 6%.

However, even if some companies 'earnings growth exceeds expectations, it will be difficult to change the recent downturn in China Stock Exchange. Alibaba's share price fell 2.61% that night to close at $98.51. In addition, Chinese stocks such as Baidu, Sohu, Ctrip, and Huanju Times have all suffered continued declines in recent days. This still couldn't resist the craze of domestic companies to list in the United States. On October 27, ZTO Express landed on the New York Stock Exchange with an opening price of US$18.40. Finally, its share price fell 15% after breaking. Coincidentally, Wanguo Data landed on Nasdaq the day before yesterday, with an issue price of US$10/share and closing at US$10.41, up only 4.1%.

BAT accelerates differentiation.

As an Internet giant that started out in e-commerce, among the revenue of 34.292 billion yuan in the current quarter, core e-commerce revenue of 28.493 billion yuan accounted for 83%. Among the remaining 17% of revenue, Alibaba Cloud contributed 1.493 billion yuan, a year-on-year increase of 130%. The large entertainment sector contributed 3.608 billion yuan, a year-on-year increase of 320%.

Judging from the proportion of business income, Alibaba has begun to show a convergence effect from its core e-commerce to its diversified business layout of payment and finance, big data cloud computing, big entertainment, and intelligent logistics networks.

Regarding the decline in its share price, special analysts at Tiger Securities believed in an interview with reporters that Alibaba has increased by more than 20% since its earnings report was released last quarter. Investors took profits when the market system risks were uncertain, resulting in Alibaba's shares being sold in a large amount. In addition, the day before the earnings report, the SEC's investigation of Ali's accounting incident was revisited, which also added to the uncertainty.

However, Goldman Sachs expects Alibaba's revenue in a series of core business lines such as e-commerce, payments, media and cloud computing to continue to grow, and Alibaba's cloud business will achieve profitability in the next two years. At the same time, it is more optimistic about Ant Financial and Rookie Growth prospects. The bank raised its target price for Ali from $120 per share to $130.

As of the deadline for writing, Alibaba's market value had reached US$245.832 billion, Tencent's market value had reached US$250 billion, and another giant, Baidu, had a market value of only US$58.335 billion. The traditional "BAT" Big Three have shown obvious divisions. On October 28, Baidu released its third quarterly report this year. Total revenue was RMB 18.253 billion (approximately US$2.737 billion), down 0.7% from the same period last year. This is also the first time in Baidu's history that "negative growth" has occurred.

It is worth noting that Baidu's number of active online marketing customers in the third quarter was 524,000, a decrease of 70,000 from the previous quarter. This change is closely related to the "Wei Zexi Incident".

Robin Li, founder and CEO of Baidu, said that in the third quarter, Baidu had required customers in the medical and financial industries to provide ICP filings and pass corporate account verification. These measures were the main reason for the decline in the number of Baidu's consumer customers in the third quarter. In the fourth quarter, Baidu will comprehensively require all customers to meet this qualification requirement. On the existing basis, Baidu will further optimize the quality of its customers, consolidate and improve its business model, develop new customers and further enhance the customer experience.

Therefore, Baidu's revenue in the fourth quarter will continue to be affected by the increase in customer qualification thresholds. Baidu's financial report also predicts that operating income in the next quarter is expected to decline by 1.7% year-on-year to increase by 4.6%. In the eyes of industry insiders, the dividend period of rapid Internet growth has completely become a thing of the past and has entered the new normal of the Internet economy. The Internet has become infrastructure in many ways, and it will be difficult for Baidu to continue to achieve its previous rapid growth.

Are Chinese stocks undervalued?

Compared with the popularity of giants in U.S. stocks, a large number of small and medium-sized stocks are still dreaming of privatization.

Especially in 2016, companies that made privatization offers showed an explosive trend. Among the less than 300 Chinese-listed companies, more than 30 were advancing the privatization process and preparing to return to the domestic capital market after completing privatization.

On September 21, Dangdang, the first domestic B2C company listed in the United States, completed the privatization and delivery, delisted from the New York Stock Exchange and became a privately held company. In 2010, Dangdang went public on the New York Stock Exchange with the concept of "China's Amazon". The issue price was US$16 and the P/E ratio on the day of listing exceeded 100 times, setting the highest P/E ratio of a listed company in the United States at that time.

However, Dangdang, which had not long been listed, caught up with the "China Stock Exchange" and was suppressed by professional short sellers such as Muddy Waters. In 2011, when the "China Stock Exchange" was at its peak, Dangdang's share price once fell to US$4.8. Subsequently, the rise of emerging platforms such as Jingdong Mall, Suning Tesco, and Vipshop made Dangdang the second echelon of the e-commerce industry.

The attitude of the management of other privatized companies is exactly the same. On July 9, 2015, after Dangdang announced its privatization, Yu Yu, chairman and co-founder of Dangdang, stated in an internal letter that Dangdang's current market value does not reflect Dangdang's value.

However, not all privatisation goes smoothly. A large number of companies such as Huanju Times, iQiyi, Momo, and Century Internet have abandoned or suspended their privatization plans due to domestic policy adjustments.

In fact, the number of Chinese stock companies listed in the United States in 2015 has dropped sharply, and their stock price performance has become more divided. In 2014, Chinese stock companies set off a wave of listings in the United States. A total of 15 companies went public in the United States throughout the year.

Many entrepreneurs interviewed by 21st Century Business Herald believe that without equity structure and policy constraints, A-shares are still the first choice for listing. Not only can they obtain higher valuations, but they are also easy for domestic users and investors to understand them, which is more conducive to the recognition and evaluation of the company's value.

Against

the backdrop of the sluggish stock prices of China Stock Exchange and the return to A-shares, some companies are also choosing to go out to sea without fear of wind and rain.

The weaker market also affected the company's IPO. On October 27, ZTO Express landed on the New York Stock Exchange. This was the largest China company to go public in the United States since Alibaba's initial public offering in the United States in 2014. However, it opened at $18.40 and later broke down as much as 15%. In the past few days, the company's share price has been falling, and at the time of press writing, its share price was US$16.

Another listed company did not perform well either. On the evening of November 2, Wanguo Data landed on Nasdaq, with an issue price of US$10/share, closing at US$10.41, up only 4.1%. According to public information, Wanguo Data is a high-performance data center developer and operator. It is also another independent third-party large-scale data center operator listed in the United States after Century Internet and Lanxun Communications.

Regarding the reasons for choosing to go public at this time, Huang Wei, chairman and CEO of Wanguo Data, explained to the media that Wanguo Data is an asset-heavy company and needs to find a capital market that has a better understanding of its business model. American investors have a better understanding of the data center. Understand, have a forward-looking understanding of the application needs of this segment of the industry, and have sufficient funds.

The aforementioned special analyst at Tiger Securities believes that U.S. stocks are actually not just China stocks, but the entire market is falling. The S & P 500 index has fallen for seven consecutive days, the longest consecutive decline since 2011. This is the fourth time in the past 20 years. The first occurred during the Lehman crisis in 2008, and the subsequent two occurred during the European debt crisis in 2011. "There is no so-called underestimation of the Chinese Stock Exchange. Compared with the A-share market, it is underestimation because the overall valuation of A-shares is too high."

In his view, the weakness of U.S. stocks has affected the company's IPO. ZTO went public in the United States because it is a VIE structure itself. Now it takes at least half a year to remove the VIE, and it takes longer to queue back to A-shares. Moreover, this is not the typical listing window for A-shares, and there may be no chance to list after the good financing period.

Some U.S. stock investors also analyzed that the risks of Chinese stocks and other stocks are similar, and it is normal to have volatility. The upcoming "Double Eleven" may help the stock prices of the e-commerce industry and the express delivery industry rebound.

Editor: Nancy