BIDU(09888) 光大证券·2024-08-06 00:01Investment Rating - The report maintains a "Buy" rating for Baidu Group-SW (9888.HK) with a target price of 165 HKD, compared to the current price of 83.50 HKD [3][13]. Core Insights - Baidu Group is expected to experience a slight decline in total revenue for Q2 2024, with a projected year-on-year decrease of 0.8% to 33.8 billion RMB. The core revenue is also expected to decline by 0.8% to 26.2 billion RMB. The core non-GAAP operating profit is anticipated to be 6.3 billion RMB, down 4.9% year-on-year, resulting in an operating margin of 24.0% [2][11]. Summary by Sections Online Marketing Business - The online marketing services are projected to decline by 4% year-on-year to 18.82 billion RMB in Q2 2024. This decline is attributed to a high base from the previous year, a weak macroeconomic environment affecting small and medium advertisers, and the transition from CPC to CPS models aided by generative AI [2][11]. Non-Online Marketing Business - The non-online marketing business is expected to grow by 8.5% year-on-year to 7.379 billion RMB, primarily driven by Baidu's intelligent cloud services. The contribution from generative AI is anticipated to increase, improving profit margins compared to traditional cloud services [2][11]. AI Business Development - The AI business is showing promising growth, with the Wenxin large model user base exceeding 300 million and daily API calls reaching 500 million. The training efficiency has improved significantly, and Baidu is continuously enhancing its AI application ecosystem [2][11]. Apollo Go Strategy - Apollo Go has established a leading position with operations in 10 cities and aims to achieve economic balance in Wuhan by deploying 1,000 autonomous vehicles. The focus is on optimizing operational management and developing new vehicle models to enhance profitability [2][11]. Profit Forecast and Valuation - The report slightly adjusts the non-GAAP net profit forecasts for 2024-2026 to 28.4 billion, 29.6 billion, and 31.2 billion RMB, respectively. The valuation is set at 12.0x PE for advertising, 4.5x PS for intelligent cloud, and 4.5x PS for other businesses, maintaining a target price of 165 HKD [2][11].