BIDU(09888) 国投证券·2024-08-20 23:41Investment Rating - The report assigns a "Buy-A" rating to Baidu Group, with a target price of HKD 111, based on a valuation of RMB 285.1 billion (HKD 310.8 billion) for 2024 [4][6][67]. Core Insights - Baidu is transitioning from an internet-centric model to an AI-first approach, leveraging its advancements in AI models to reshape both B2B and B2C businesses. The company expects significant revenue growth driven by its core search and marketing business, as well as its cloud and intelligent driving sectors [3][67]. - The report forecasts Baidu's revenue for 2024-2026 to be RMB 1433.8 billion, RMB 1523.6 billion, and RMB 1607.8 billion, respectively, with Non-GAAP net profits of RMB 290.9 billion, RMB 309.4 billion, and RMB 327.1 billion [3][67]. Summary by Sections Company Overview - Baidu has evolved from a search engine to a comprehensive internet company integrating AI and content ecosystems, with over 70% of its revenue now driven by AI [1][2][23]. - The company has established three core business lines: mature mobile ecosystem, rapidly growing intelligent cloud, and future-oriented intelligent driving [1][2][23]. AI-Driven Transformation - Baidu's mobile ecosystem is centered around online marketing, with AI enhancing its commercial potential. The company has launched numerous AI-native applications based on its Wenxin model [2][24]. - The intelligent cloud business has seen significant growth, with its revenue share increasing from 8.0% in 2019 to 18.1% in 2023, driven by rising demand for AI model training and inference [2][20]. - Baidu is a pioneer in intelligent driving, with its Apollo platform offering various business models, including providing solutions to automakers and operating Robotaxi services [2][51][55]. Financial Analysis - Baidu's revenue for 2023 reached RMB 1346 billion, a year-on-year increase of 8.8%, with Non-GAAP net profit growing by 39% to RMB 287.5 billion [17][26]. - The company's core business revenue has shown steady growth, with online marketing services contributing RMB 751 billion in 2023, while cloud services reached RMB 187.2 billion [20][27]. Profitability and Valuation - The report anticipates stable gross margins for Baidu, with projections of 53.5% for 2024, and highlights the importance of AI and intelligent driving in driving future growth [62][63]. - The valuation approach includes segmenting the business into online marketing and intelligent cloud, with respective valuations of RMB 177.5 billion and RMB 107.6 billion [63][65].