中国互联网与新媒体：中国互联网考察的关键要点

EQUITY: INTERNET & NEW MEDIA Key takeaways from China internet tour Research Analysts China Internet & New Media Jialong Shi - NIHKJialong.shi@nomura.com+852 2252 1409 Top picks: Alibaba, Tencent, JDH and J&T Interesting feedbacks from select companies Rachel Guo - NIHKrachel.guo@nomura.com+852 2252 1400 The Nomura China internet team hosted a week-long China internet tour across Hangzhou,Shanghai and Beijing during 6-9 January and met 21 corporate managements and industryexperts that represent most of the internet verticals including managements from listedcompanies such as Alibaba (BABA US, Buy), Baidu (BIDU US, Buy), Bilibili (BILI US, Neutral),Didi (DIDIY US, Not rated), AliHealth (241 HK, Not rated), FTA (YMM US, Not rated), Trip.com(TCOM US, Neutral), Kanzhun (BZ US, Not rated), NetEase (NTES US, Buy), Lianlian Digital(2598 HK, Not rated), Yalla (YALA US, Not rated), BingEx Limited (FLX US, Not rated), INLYMedia (603598 CH, Not rated) and Zibuyu (2420 HK, Not rated). We also arranged meetingswith experts from Douyin (unlisted), Shein (unlisted), Xiaohongshu (unlisted) and the AI musicindustry. Below are highlights of our meetings. Alibaba (BABA US, Buy)highlighted that the weak consumer sentiment in the Decemberquarter (Dec Q) led to intense competition in the ecommerce industry. Managementmentioned the tightened VAT collection, as discussed inour recent report, is another negativefactor which the company is monitoring closely. We believe, as indicated in our sector report,this sudden tightened collection of VAT likely played a big role in the dramatic slowdown of theentire ecommerce industry – we estimate BABA’s CMR growth likely slowed to just 1% in theDec Q, from ~10% in the preceding quarters, while its competitor, Douyin, likely decelerated to9% growth in Dec 2025 from average growth of 33% in 9M25. To help our clients better digest the dynamics in China’s ecommerce market and itsoutlook in 2026, the Nomura China internet team is hosting a group call with a Douyinecommerce expert at 9:30-10:30am HKT on 15 January. Please contact your Nomurasales representative if interested. While cautious on ecommerce, BABA sounded bullish about its AI cloud, expectingcontinued solid growth in this segment. We expect AliCloud revenue to have grown 38%y-y in the Dec. Q, up from the 34% growth in the preceding quarter. BABA indicated thatits AI ambition is not limited to business-oriented services where BABA is a leaderalready. The company is also exploring opportunities in consumer AI applications by re-launching its consumer AI chatbot, Qwen, in 4Q25. In addition, its Quark app hasmaintained strong traction with users. Recently the Quark team entered the field of smartwears by launching its first Quark-branded smart glasses. Quick commerce (QC) likely recorded significant reduction in losses in the Dec Q, basedon BABA management’s comments. We estimate the loss might have narrowed toCNY21bn, vs a loss of CNY36bn in the Sep Q. BABA indicated that it did not cutsubsidies to pursue improvement in UE (unit economics). Rather, it has adjusted thestructure of subsidies to shift towards high ticket-size orders and more loyal diners to haveimproved the overall operating efficiency. BABA continues to prioritize growth/market share gains over profitability for QC, believingthe latter will be a natural product of expanded business scale. Its strength lies in richsupplies, in particular for retail QC, underpinned by its Tmall supermarket, Freshippo andTmall merchants who run both online and offline stores. Baidu (BIDU US, Buy)maintained a bullish tone about the outlook of its AI underpinned byindustry-leading chip business operated under the brand, Kunlunxin (KLX, unlisted) which hasfiled for an IPO in the Hong Kong market. Baidu's management identified five high-growth businesses: AI Cloud Infrastructure, AI Production Complete: 2026- Applications, Apollo Go (Robotaxi), AI-native Marketing Services, and AI Chips (Kunlun).In 3Q25, the combined revenue of the five disclosed segments reached ~CNY10bn, growingroughly 50% y-y vs the reported revenue of CNY25bn (down 7% y-y) for Baidu Core in 3Q25.Baidu suggested it is likely paying a regular cash dividend in order to improve the visibility of itscapital return to long-term shareholders. We think the upcoming IPO of KLX remains a keycatalyst for the Baidu stock. We value KLX at USD32bn by applying a 40% discount to themarket cap of Cambricon (688256 CH, Not rated), implying 19x our projected KLX’s sales ofCNY12bn in FY27F. Based on management comments, we believe our valuation is likelybelow the company’s expectation on KLX’s valuation upon the IPO. Baidu confirmed othermeasures to unlock the assets value for long-term shareholders are also on the table after thecompletion of KLX’s IPO. We believe these upcoming efforts will likely include: 1) theconversion of a primary listing for Baidu’s Hong Kong shares so as to pave the way for itsinclusion into the Hong Kon