Investment Rating - The investment rating for Baidu Group-SW is "Buy" (maintained) [6][13]. Core Views - The growth of intelligent cloud services is accelerating due to AI, and the advertising business is expected to gradually recover with the macroeconomic environment and AI search commercialization [6]. - The non-GAAP net profit forecast for 2025-2026 has been slightly adjusted to 27.1 billion and 29.4 billion CNY respectively, with a new forecast for 2027 at 32 billion CNY, corresponding to year-on-year growth rates of 0.2%, 8.7%, and 8.7% [6]. - The current stock price of 88.35 HKD corresponds to a price-to-earnings ratio (PE) of 8.7, 8.0, and 7.4 for the years 2025-2027 [6]. Financial Summary and Valuation Indicators - Revenue for 2023 was 134.6 billion CNY, with a year-on-year growth of 8.8%. For 2024, revenue is expected to decline slightly to 133.1 billion CNY [9]. - Non-GAAP net profit for 2023 was 28.7 billion CNY, with a year-on-year growth of 39.0%. The forecast for 2024 is a decline to 27.0 billion CNY [9]. - The gross margin for 2025 is projected to be 51.3%, with a net margin of 19.7% [9]. - The diluted EPS for 2025 is expected to be 9.4 CNY, with a PE ratio of 8.7 [9].

Financial Performance - Baidu's total revenue for Q4 2024 was RMB 34.951 billion (USD 4.675 billion), a decrease of 2% year-over-year[6]. - Operating profit for Q4 2024 was RMB 5.392 billion (USD 537 million), down 27% year-over-year[6]. - Net profit attributable to Baidu for Q4 2024 was RMB 2.599 billion (USD 711 million), a 100% increase year-over-year[6]. - Total revenue for the fiscal year 2024 was RMB 133.1 billion (USD 18.2 billion), a year-on-year decrease of 1%[20]. - Net profit attributable to Baidu for the twelve months ended December 31, 2023, was RMB 20,315 million, an increase from RMB 23,760 million in the previous year[36]. - Baidu's net profit margin for the twelve months ending December 31, 2023, was 15%[46]. - Baidu's total revenue for the twelve months ending December 31, 2023, was RMB 55.83 billion, with a projected increase to RMB 66.40 billion for 2024[37]. - The company expects total revenue for the twelve months ending December 31, 2024, to be approximately RMB 133,125 million, indicating a slight decrease of 1%[46]. Revenue Breakdown - Baidu's core revenue for Q4 2024 was RMB 27.7 billion (USD 3.8 billion), a year-on-year increase of 1%[4]. - Online marketing revenue decreased by 7% year-on-year to RMB 17.9 billion (USD 2.5 billion) in Q4 2024[4]. - Non-online marketing revenue increased by 18% year-on-year to RMB 9.8 billion (USD 1.3 billion), primarily driven by the smart cloud business[4]. - Total revenue for Baidu Group was RMB 27,488 million for the three months ended December 31, 2023, representing a year-over-year increase of 1% and a quarter-over-quarter increase of 4%[42]. - Baidu's core business generated RMB 103,465 million in revenue, while iQIYI contributed RMB 31,873 million, reflecting a year-over-year decline of 8%[46]. Expenses and Profitability - Research and development expenses for Q4 2024 were RMB 5.5 billion (USD 756 million), a decrease of 12% year-over-year[14]. - Sales and management expenses for Q4 2024 were RMB 6.7 billion (USD 915 million), an increase of 14% year-over-year[14]. - Operating profit for Baidu Group was RMB 21,856 million, with an operating margin of 16% for the same period, reflecting a 3% decrease year-over-year[46]. - The company reported a total cost and expenses of RMB 112,742 million, which is a 1% decrease year-over-year[46]. - Baidu's adjusted EBITDA for the twelve months ended December 31, 2023, was RMB 31,863 million, with an expected increase to RMB 30,587 million for the twelve months ending December 31, 2024[58]. User Engagement and Growth - The average daily API calls for the Wenxin series models reached 1.65 billion in December 2024, with external API calls increasing by 178% quarter-over-quarter[11]. - Monthly active users of Baidu Wenku's AI features reached 94 million in December 2024, a year-over-year increase of 216%[11]. - As of December 2024, Baidu's monthly active users reached 679 million, a year-on-year growth of 2%[4]. - The company anticipates continued growth in user data and market expansion, supported by new product developments and technological advancements[54]. Investments and Cash Flow - Free cash flow for the fiscal year 2024 was RMB 13.1 billion (USD 1.8 billion), while free cash flow excluding iQIYI was RMB 11.1 billion (USD 1.5 billion)[24]. - The net cash used in investing activities for the twelve months ended December 31, 2023, was RMB 48,657 million, indicating a significant investment outflow[52]. - Baidu's capital expenditures for the twelve months ended December 31, 2023, amounted to RMB 11,154 million, indicating ongoing investments in infrastructure[52]. - The company experienced a net cash outflow from financing activities of RMB 9,876 million for the twelve months ended December 31, 2023, reflecting changes in capital structure[52]. Market Position and Recognition - Baidu was included in the S&P Global Sustainability Yearbook 2024, highlighting its progress in ESG practices[11]. - The company is focusing on market expansion and new product development, as indicated by increased R&D spending and asset growth[37].

Investment Rating - The investment rating for Baidu Group-SW is "Buy" (maintained) [1] Core Insights - Baidu's AI advancements are impressive, with the AI features of Baidu Wenku surpassing 90 million MAU in January, showing a year-on-year growth of 230% in DAU. The paid user base has exceeded 40 million, with a year-on-year growth rate of 60% [3] - The company's revenue for Q4 2024 is expected to be 33.2 billion yuan, a year-on-year decline of 5%, with core revenue projected at 26.8 billion yuan, down 3% year-on-year. Adjusted net profit is anticipated to reach 3.87 billion yuan [10] - The cloud business is expected to maintain rapid growth, driven by increasing demand for AI applications and the gradual recovery of the advertising business in 2025 [10][11] Financial Forecasts - Total revenue for Baidu Group is projected to be 132.2 billion yuan in 2024, with a slight decline of 1.78% year-on-year, and is expected to grow by 3.57% to 139.9 billion yuan by 2026 [1][14] - The adjusted net profit is forecasted to be 24.1 billion yuan in 2025, reflecting a growth of 1.82% from 2024 [1][14] - The Non-GAAP net profit for 2025 is expected to be 25.9 billion yuan, with a corresponding PE ratio of 8.2 times [11][14]

Investment Rating - Maintained "Buy" rating for Baidu Group-SW (09888 HK) [1] Core Views - Baidu's AI progress is impressive, with Baidu Wenku and Baidu Netdisk showing significant growth in AI-related metrics [3] - Baidu Wenku's AI MAU reached 90 million in January 2024, with AI DAU growing 230% YoY [3] - Baidu Netdisk's AI DAU increased 90% YoY in January 2024, with AI-driven revenue growing 120% YoY [3] - Baidu's cloud business is expected to maintain rapid growth in 2025, driven by increasing demand for AI agent development and applications [10] - The company's advertising business is expected to improve quarter by quarter in 2025, supported by economic policies and AI product commercialization [10] Financial Forecasts - 2024Q4 revenue is expected to be 33 2 billion yuan, down 5% YoY [10] - 2024Q4 adjusted operating profit is forecasted at 4 5 billion yuan, with a 15 5% margin for Baidu Core [10] - 2024Q4 adjusted net profit is projected at 3 87 billion yuan [10] - 2024-2026 Non-GAAP net profit forecasts have been revised downward to 24 2/26 0/28 3 billion yuan [11] - 2025 Non-GAAP PE is estimated at 8 2x [11] AI Progress - Baidu Wenku has launched over 100 AI features, including intelligent PPT creation, AI writing assistant, and AI search [3] - Baidu Netdisk has integrated AI features such as scanning, doodling, voice transcription, and meeting minutes [3] - The "Free Canvas" feature, jointly developed by Baidu Wenku and Baidu Netdisk, is in public testing and expected to boost user engagement and monetization [3] Financial Metrics - 2024E revenue is projected at 132 2 billion yuan, with a 1 78% YoY decline [1] - 2025E revenue is forecasted at 135 1 billion yuan, with a 2 19% YoY growth [1] - 2024E net profit attributable to shareholders is expected to be 23 67 billion yuan, up 16 5% YoY [1] - 2025E net profit attributable to shareholders is projected at 24 1 billion yuan, with a 1 82% YoY increase [1]

Investment Rating - The report maintains a "Buy" rating for Baidu Group-SW (9888.HK) with a target price of HKD 128.7, compared to the current price of HKD 80.15 [3]. Core Views - Baidu Group is expected to experience a revenue decline of 4.5% year-on-year in Q4 2024, with total revenue projected at RMB 33.37 billion. The core revenue is anticipated to decrease by 2.5% to RMB 26.79 billion. The non-GAAP operating profit is expected to drop by 28.9% to RMB 4.41 billion, resulting in an operating margin of 16.5% [1]. - The online marketing business remains under pressure, but there are expectations for stabilization and gradual recovery in 2025, driven by AI commercialization efforts [1]. - Non-online marketing business, particularly cloud services, is showing promising growth, with Baidu's AI features attracting a significant number of paid users [1]. Summary by Sections Revenue Forecast - For Q4 2024, Baidu's total revenue is projected at RMB 33.37 billion, a 4.5% decline year-on-year. The core revenue is expected to be RMB 26.79 billion, down 2.5% [1][11]. - The online marketing services revenue is forecasted to decrease by 8.9% to RMB 17.48 billion, influenced by a weak macro environment and the ongoing transformation of user search through generative AI [1]. Profitability - The non-GAAP net profit for Q4 2024 is expected to be RMB 3.99 billion, with a net profit margin of 12.0% [1]. - The report revises the non-GAAP net profit forecasts for 2024-2026 to RMB 24.3 billion, RMB 25.6 billion, and RMB 28.0 billion, respectively, reflecting a downward adjustment of 8.3%, 7.8%, and 4.6% from previous estimates [1][12]. Business Segments - The non-online marketing business is projected to grow by 12.3% year-on-year in Q4 2024, reaching RMB 9.32 billion. This growth is attributed to the increasing demand for Baidu's cloud services and the successful monetization of Baidu Wenku's AI features, which have seen paid user numbers exceed 40 million [1]. - Baidu's AI capabilities continue to strengthen, with significant user engagement in AI applications and the introduction of innovative products like AI glasses [1][10]. Valuation - The report assigns a valuation multiple below the industry average for 2025, with advertising, smart cloud, and other businesses valued at 10.0x PE, 2.5x PS, and 3.0x PS, respectively. The target price is adjusted to HKD 128.7 [1][3].

Investment Rating - Maintains a "Buy" rating for Baidu Group-SW (9888 HK/BIDU US) [6] Core Views - Baidu's revenue growth in 4Q24 is expected to face short-term pressure due to a mild macroeconomic environment, AI-driven business transformation, and the exit of the Jiyue business [1] - Baidu Core 4Q24 revenue is projected to decline by 5.1% YoY to RMB 26.08 billion, with non-GAAP operating profit at RMB 4.15 billion, reflecting a 6.6pp YoY decline in non-GAAP operating margin [1] - Key catalysts for future valuation include: 1) AI-driven improvements in search advertising, 2) strong growth in AI cloud revenue, 3) faster-than-expected expansion of the Apollo Go business, and 4) stronger-than-expected shareholder return initiatives [1] Financial Forecasts - Baidu Core 4Q24 advertising revenue is expected to decline by 8.6% YoY to RMB 17.51 billion, driven by reduced ad spending in sectors like real estate, transportation, and healthcare [2] - AI cloud revenue is projected to grow 14.0% YoY to RMB 6.48 billion, driven by increased demand for GPU-related AI cloud services [2] - The exit of the Jiyue business is expected to negatively impact Baidu Core's revenue and adjusted operating profit by RMB 3 billion and RMB 900 million, respectively, in 4Q24 [2] - Non-GAAP net profit forecasts for 2024/2025/2026 are revised to RMB 24.6/27.2/30.0 billion, reflecting downward adjustments in iQiyi and Jiyue-related revenue forecasts [3][11] Valuation and Target Price - The SOTP-based target price for Baidu's US shares is adjusted to USD 115.4 (from USD 119.8), and for HK shares to HKD 112.3 (from HKD 116.4) [3][16] - The new target price implies 11.3x and 10.3x 2025/2026E non-GAAP PE, respectively [3] Segment Valuation - Baidu Core advertising business is valued at USD 78.1 per ADS (HKD 76.0 per share), based on 8.0x 2025E PE, reflecting slower-than-expected AI-driven ad revenue growth [16] - Baidu AI Cloud is valued at USD 27.7 per ADS (HKD 27.0 per share), based on 3.0x 2025E PS, reflecting slower-than-expected demand for AI cloud services [16] - iQiyi and other investments are valued at USD 9.6 per ADS (HKD 9.3 per share), with a 30% holding discount applied [16] Key Financial Metrics - Baidu's 2024E revenue is projected at RMB 131.5 billion, a 2.3% YoY decline, with adjusted net profit of RMB 24.6 billion, down 14.3% YoY [5][11] - Non-GAAP operating margin for Baidu Core is expected to decline to 15.9% in 4Q24, down from 22.5% in 4Q23 [14] - Baidu's 2024E adjusted ROE is forecasted at 9.25%, down from 11.86% in 2023 [5] Industry Comparison - Baidu's 2025E PE of 11.3x is below the average of 12.9x for online advertising peers like Alibaba, Tencent, and Google [18] - Baidu AI Cloud's 2025E PS of 3.0x is significantly lower than the average of 7.4x for cloud and AI peers like Amazon, Microsoft, and Google [18]

Investment Rating - The report maintains a "Buy" rating for Baidu Group-SW (09888) with a target price of HKD 137 [1] Core Views - Baidu's Q3 2024 total revenue was RMB 33.6 billion, down 3% YoY, with Non-GAAP net profit of RMB 5.9 billion, down 19% YoY [1] - Baidu Core revenue was RMB 26.5 billion, with online marketing revenue at RMB 18.8 billion, down 4% YoY due to macroeconomic challenges [1] - Non-online marketing revenue grew 12% YoY to RMB 7.7 billion, driven by AI Cloud, which contributed RMB 4.9 billion, up 11% YoY [1] - AI revenue accounted for 11% of total AI Cloud revenue, with iQIYI revenue at RMB 7.2 billion, down 10% YoY [1] - The company's strong technical advantages in AI infrastructure are expected to drive further growth in AI Cloud revenue [1] AI Cloud & ERNIE - Baidu expanded its ERNIE series with two enhanced lightweight models, Speed Pro and Lite Pro [1] - ERNIE processed approximately 1.5 billion API calls daily in November, up from 600 million in August, indicating strong market adoption [1] - ERNIE Agent's daily conversations reached 15 million, with monthly active users at 704 million, up 6% YoY [1] - AI-generated content in search results increased from 18% to 20%, with AI features covering nearly 70% of Baidu App's monthly active users [1] Profitability - Non-GAAP operating profit for Q3 2024 was RMB 7 billion, with an operating margin of 26% [1] - The company expects continued improvement in operating margins as user behavior on Baidu Search improves [1] Autonomous Driving - Baidu's autonomous driving service, Apollo Go, provided approximately 988,000 rides in Q3 2024, up 20% YoY [1] - As of October 28, 2024, Apollo Go has completed over 8 million rides, with the sixth-generation autonomous vehicle, Apollo RT6, priced competitively below USD 30,000 [1] Investment Recommendation - The report adjusts revenue forecasts for FY2024-2026 to RMB 1338/1476/1641 billion, with Non-GAAP operating profit adjusted to RMB 274/308/342 billion [1] - The target price of HKD 137 is based on a SOTP valuation, assigning 8x P/E for advertising, 3x P/S for cloud business, and 14x P/E for iQIYI's non-advertising revenue [1] - The "Buy" rating is maintained due to Baidu's ongoing AI transformation and investments in AI Cloud and autonomous driving [1]

Investment Rating - The report assigns a "Buy" rating to Baidu Group-SW (09888) with a target price of HKD 90 per share, implying a 12% upside potential [10] Core Views - Baidu's AI-driven intelligent cloud business is experiencing high growth, with AI applications and autonomous driving accelerating their market penetration [3] - The domestic internet cloud business has passed its low point, and AI is driving revenue growth in both cloud and advertising sectors [3] - Baidu's AI capabilities, particularly in natural language processing (NLP), are leading in the Chinese market, with daily calls to the Wenxin large model exceeding 1.5 billion, a 30x increase from a year ago [4] - Autonomous driving services, such as "Luobo Kuaipao," are expanding, with 100% unmanned services now available in Wuhan and other cities [5] - Despite macroeconomic pressures, Baidu's core online marketing revenue remains stable, supported by a robust user base, with Baidu APP's MAU reaching 704 million in 3Q24 [5] Financial Projections - Baidu Group's revenue is expected to be RMB 133.9 billion, RMB 140.6 billion, and RMB 148.9 billion for 2024, 2025, and 2026, respectively, with growth rates of -1%, 5%, and 6% [6] - Non-GAAP net profit is projected to be RMB 26.4 billion, RMB 28.1 billion, and RMB 31.5 billion for the same periods, with growth rates of -8%, 6%, and 12% [6] - The intelligent cloud business is expected to grow rapidly, with revenues of RMB 21.9 billion, RMB 25.2 billion, and RMB 29.0 billion for 2024-2026, representing year-on-year growth of 17%, 15%, and 15% [11] AI and Cloud Business - Baidu's AI framework is robust, with significant advancements in NLP and generative AI, driving the intelligent cloud business [4] - The intelligent cloud business accounted for 19% of Baidu's core revenue in 3Q24, up from 4% in 2018, with AI-related revenue contributing 11% in 3Q24 [4][5] - Baidu's AI applications are accelerating, with the 2024 Baidu World Conference focusing on AI application deployment, including the release of iRAG technology, a no-code tool "Miaoda," and AI-powered glasses [4] Autonomous Driving - Baidu's autonomous driving business, including "Luobo Kuaipao" and Apollo ADFM, is making significant progress, with full unmanned services now operational in multiple cities [5] - The company has partnered with Geely to produce smart electric vehicles, with the JiYue 001 and JiYue 007 models showing strong sales growth [5] Online Marketing - Baidu's core online marketing revenue is under pressure due to macroeconomic factors and increased competition in the online advertising space, with a projected revenue decline of 2% in 2024 [5][11] - Despite these challenges, Baidu's user base remains strong, with Baidu APP's MAU reaching 704 million in 3Q24, up 6% year-on-year [5] Industry Context - The domestic public cloud market has slowed since 2021, but AI is expected to be a key driver for growth in the cloud business for internet companies [34] - Baidu's AI capabilities, including its large models and generative AI, are positioning it as a leader in the AI cloud era, with significant advantages in data, algorithms, and computing power [34]

Investment Rating - Buy (Maintained) [1] Core Views - 2024Q3 revenue met market expectations, while adjusted net profit fell short of expectations [2] - Advertising business remains under pressure, but generative AI continues to transform the ecosystem [3] - Non-advertising business: Generative AI drives growth in cloud computing [4] - Increased customer acquisition and cloud-related costs were partially offset by expense control [5] Financial Performance - 2024Q3 revenue was RMB 33.6 billion, down 3% YoY, in line with Bloomberg consensus [2] - Non-GAAP operating profit was RMB 7 billion, down 8% YoY, below Bloomberg consensus [2] - Non-GAAP net profit was RMB 5.9 billion, down 19% YoY, below Bloomberg consensus [2] - Share repurchase amount since 2024Q3 was USD 161 million, with cumulative repurchase under the 2023 plan reaching approximately USD 1.4 billion [2] Advertising Business - 2024Q3 Baidu Core revenue was RMB 26.5 billion, flat YoY, in line with Bloomberg consensus [3] - Online marketing revenue was RMB 18.8 billion, down 4% YoY [3] - Over 20% of search results now include generative AI content, up from 18% in Q2 [3] - Advertising business is expected to remain weak in Q4, but generative AI is expected to have a positive impact in the medium to long term [3] Non-Advertising Business - Cloud revenue grew 11% YoY in 2024Q3, driven by generative AI [4] - Daily API calls for the Wenxin series models reached 1.5 billion in November 2024, up from 600 million in August [4] - AI accounted for 11% of cloud revenue in 2024Q3, up from 4.8% in 23Q4 [4] - Autonomous driving service "Luobo Kuaipao" provided 988,000 orders in Q3, up 20% YoY [4] - Fully autonomous orders accounted for over 70% of total orders nationwide, increasing to 80% in October 2024 [4] Cost and Expense Management - Baidu Core non-GAAP gross margin was 59.1% in 2024Q3, down 1.4 percentage points YoY [5] - Baidu Core non-GAAP sales and administrative expenses were RMB 4.7 billion, accounting for 17.8% of Baidu Core revenue, up 0.8 percentage points YoY [5] - Baidu Core non-GAAP R&D expenses were RMB 4.3 billion, accounting for 16.4% of Baidu Core revenue, down 2.1 percentage points YoY [5] Financial Forecasts - 2024E revenue is forecasted at RMB 132.4 billion, down 1.67% YoY [1] - 2024E net profit attributable to parent company is forecasted at RMB 24.4 billion, up 20.17% YoY [1] - 2024E Non-GAAP net profit is forecasted at RMB 27.1 billion, down 5.78% YoY [1] - 2024E EPS is forecasted at RMB 8.70, with a P/E ratio of 8.60 [1] Market Data - Closing price (HKD): 80.45 [8] - 52-week low/high (HKD): 75.20/119.90 [8] - Price-to-book ratio: 0.87 [8] - Market capitalization (HKD million): 183,461.35 [8] Key Financial Ratios - 2024E Non-GAAP EPS (RMB): 8.70 [18] - 2024E ROE: 9.13% [18] - 2024E gross margin: 50.16% [18] - 2024E net profit margin: 18.45% [18] - 2024E debt-to-asset ratio: 31.84% [18]

Investment Rating - The report maintains a "Buy" rating for Baidu with a target price of HKD 124.15 [5][11] Core Views - Baidu's total revenue for Q3 2024 was RMB 33.56 billion (YoY -2.6%), in line with Bloomberg expectations, while adjusted net profit was RMB 5.89 billion (YoY -19%) [3] - Core advertising revenue remains under pressure, with ad revenue at RMB 18.8 billion (YoY -4.6%), while non-marketing revenue grew 12.4% YoY to RMB 7.7 billion, driven by intelligent cloud business [3] - Baidu's gross margin for Q3 2024 was 51.1% (YoY -1.6pct), with core gross margin at 58.8% (YoY -1.3pct) [3] - AI capabilities are a long-term strategic focus, with Ernie Bot daily calls reaching 1.5 billion and user base at 430 million [3] - Intelligent driving commercialization is progressing, with RoboTaxi completing 988,000 rides in Q3 2024 (YoY +20%) and cumulative rides exceeding 8 million as of October 28, 2024 [3] Financial Performance - Baidu's core revenue for Q3 2024 was RMB 26.5 billion (YoY -0.2%), slightly better than Bloomberg's expectation of -0.8% YoY [3] - Adjusted operating profit margin for Baidu core was 25.1% in Q3 2024 (YoY +0pct, QoQ -1.1pct) [3] - For 2024E, Baidu's revenue is expected to be RMB 131.9 billion (YoY -2.0%), with adjusted net profit of RMB 26.5 billion [11] - The company's 2024E adjusted PE is maintained at 12x, implying a market cap of RMB 317.7 billion [11] AI and Cloud Business - Ernie Bot ecosystem has attracted 150,000 enterprises and 800,000 developers, with PaddlePaddle ecosystem serving 430,000 enterprises and creating 1.01 million models [3] - Over 60% of central state-owned enterprises and large private enterprises have chosen Baidu Intelligent Cloud for AI innovation [3] - Cloud business revenue in Q3 2024 was RMB 4.922 billion (YoY +11.0%), contributing significantly to non-marketing revenue growth [10] Intelligent Driving - RoboTaxi service completed 988,000 rides in Q3 2024 (YoY +20%), with cumulative rides exceeding 8 million as of October 28, 2024 [3] - The sixth-generation autonomous vehicle RT6 has been deployed in multiple cities [3]