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Baidu.com Inc. 10 July 2008

Update Report – 1Q 08 Results

Robust growth in active customer-base to drive online marketing revenues

ADR HOLD Fundamental research indicates a 5% upside in the ADR over the next 6-24 months. We have
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price fullonreport
based freefactors,
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Ticker: BIDU http://www.iirgroup.com/researchoracle/viewreport/show/20278
Target price: US$350.00
We reiterate the ADR (1 ADR = 1 common share1) a HOLD with a 6-24 month target price of
Current price: US$332.83 US$350.00 per share.

European BUY The European ADR is expected to appreciate 19% over the next 6-24 months as the 5% fundamental
upside is supported by 14 percentage points upside attributable purely to the anticipated
ADR2 appreciation of the Euro against the US dollar over the same period.

Ticker: BIDUy.F
Target price: €259.26
We upgrade the European ADR from a HOLD to a BUY with a 6-24 month target price of €259.26
Current price: €217.99

Supervisor: Meera Patil

Analyst: Abhay Amlekar
Editor: Shem Pennant
Global Research Director:
Satish Betadpur, CFA
Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-24 months. If this
report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the
short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for
readers with a shorter trading horizon. These are available online only at www.researchoracle.com

Next news due:

2Q 08 results, July 2008
Report summary
Baidu.com Inc. (Baidu) announced its 1Q 08 results on 24 April 2008. While revenues, operating and
net income witnessed robust growth, margins remained under pressure from increased cost of
revenues mainly related to Traffic Acquisition Costs (TAC). The company witnessed growth in total
marketing customers reflecting the growing demand and acceptance for Baidu and its online web
based search engine. In 1Q 08, Baidu held a search market share of 60.7% in China, compared to
Google Inc.’s (Google) 26.8% and Yahoo! China’s 8.3%. With the existing and new opportunities
available in the market, we believe Baidu is well positioned to capitalize on these. However we believe
that a current levels the company’s fundamental positives are factored into the ADR price and
therefore do not anticipate significant upside potential from current levels.

Currency impact for US investors

The company reports in RMB, which we assume is its major trading currency. Earnings forecasts are
therefore also expressed in RMB. Since the RMB is pegged to the US dollar, we assume that the
impact of currency movements on the price of the ADR is neutral. Where specific currency risks are
identified, they will be highlighted in the report.

Currency impact on European ADR

The impact by itself of the anticipated currency movements on the European ADR (now €217.99),
without considering changes in the share price, is broadly positive and is expected to be:

Over 6 months: €198.11

Over 12 months: €221.89

Over 24 months: €246.54

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