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]

Investment Rating - The report maintains a "Buy" rating for Baidu Group-SW (09888 HK) [6] Core Views - Baidu's core advertising and iQIYI businesses are under short-term pressure, with 2024-2026 non-GAAP net profit forecasts revised downward to 26 1/27 2/29 8 billion yuan (previously 26 8/28 7/31 9 billion yuan), representing year-on-year growth rates of -9 3%/4 4%/9 4% [6] - The adjusted diluted EPS for 2024-2026 is projected at 9 0/9 3/10 0 yuan, with the current stock price of 76 65 HKD corresponding to 2024-2026 P/E ratios of 7 8/7 6/7 1 times [6] - Future growth is expected to be driven by macroeconomic recovery, AI product monetization, and the expansion of autonomous driving in key regions [6] Financial Performance - Baidu's 2024Q3 revenue declined by 3% year-on-year, in line with Bloomberg consensus expectations, while non-GAAP net profit fell 19% to 5 9 billion yuan, below the Bloomberg consensus of 6 2 billion yuan due to iQIYI's underperformance [7] - Baidu Core online marketing revenue decreased by 4% year-on-year in 2024Q3, underperforming the broader internet advertising market, which grew by 5 5% according to QuestMobile data [7] - AI and intelligent cloud revenue grew by 11% year-on-year in 2024Q3, with AI cloud accounting for approximately 11% of the total [7] - Autonomous driving platform Apollo Go saw a 20% year-on-year increase in ride volume in 2024Q3 [7] - iQIYI's revenue declined by 10% year-on-year in 2024Q3, with operating profit margin down by 6 percentage points [7] Business Outlook - Short-term advertising growth is pressured by weak SME client demand, increased competition, and the company's strategic shift towards AI-generated content [8] - AI is expected to enhance advertising monetization efficiency and drive cloud demand growth [8] - Autonomous driving business model validation is anticipated, with a focus on achieving breakeven in key regions [8] - AI cloud is projected to achieve higher steady-state profit margins compared to traditional businesses [8] Financial Projections - Revenue is forecasted to decline by 1 6% in 2024, followed by growth of 5 7% and 5 2% in 2025 and 2026, respectively [10] - Non-GAAP net profit is expected to decrease by 9 3% in 2024, then grow by 4 4% and 9 4% in 2025 and 2026, respectively [10] - Gross margin is projected to be 50 4% in 2024, improving to 51 2% in 2025 before declining to 42 7% in 2026 [10] - Net margin is expected to remain stable at around 19 7%-20 2% from 2024 to 2026 [10] - ROE is forecasted to decline from 10 7% in 2024 to 9 7% in 2026 [10]

Investment Rating - The report maintains an "Outperform" rating for Baidu Group-SW (09888 HK) [4] Core Views - Baidu's total revenue in Q3 2024 was RMB 33 5 billion, down 3% YoY, with adjusted net profit attributable to shareholders of RMB 5 9 billion, down 19% YoY [2] - Baidu Core revenue remained flat YoY at RMB 26 5 billion, while iQIYI revenue decreased by 10% YoY to RMB 7 2 billion [2] - Baidu Core's advertising revenue declined by 5% YoY, with 20% of search results generated by AI (up from 18% in August) and 70% of MAUs using generative search [2] - AI and large language models (LLMs) contributed incremental revenue to the advertising system, with approximately 20,000 advertisers generating daily ad spend [2] - Baidu's intelligent cloud revenue grew by 11% YoY to RMB 5 billion, with AI contributing 11% of total intelligent cloud revenue [5] - Apollo Go provided approximately 988,000 rides in Q3 2024, a 20% YoY increase, with cumulative rides exceeding 8 million in October [5] Financial Performance - Baidu Group's adjusted net profit margin remained stable at 18%, with Baidu Core's adjusted net profit margin at 21% [2] - Baidu Core's online marketing revenue was RMB 18 8 billion, down 5% YoY, while non-online marketing revenue increased by 12% YoY to RMB 7 7 billion [8] - Baidu Core's adjusted net profit attributable to shareholders was RMB 5 7 billion, down 18% YoY [8] - Baidu APP's MAUs reached 704 million in September 2024, a 6% YoY increase [16] AI and Cloud Business - AI model inference costs were optimized, with ERNIE processing 1 7 trillion tokens daily, up from 600 million in August [5] - The proportion of unmanned driving operations exceeded 70% nationwide in Q3 2024 and surpassed 80% in October, reaching 100% in Chongqing [5] - Baidu's intelligent cloud business maintained double-digit growth, with AI contributing 11% of total revenue [27] Financial Forecasts - Revenue is expected to grow from RMB 134 6 billion in 2023 to RMB 162 9 billion in 2026, with a CAGR of 7 1% [3] - Adjusted net profit attributable to shareholders is forecasted to be RMB 28 6 billion in 2024, RMB 31 billion in 2025, and RMB 33 2 billion in 2026 [30] - The adjusted EPS is projected to increase from RMB 10 19 in 2024 to RMB 11 82 in 2026 [3] Valuation - The report assigns a fair value range of HKD 100 00 to HKD 120 00 for Baidu Group-SW [4] - The current share price is HKD 76 65, with a total market capitalization of HKD 215 02 billion [4]

Investment Rating - The report indicates a positive investment outlook for Baidu, highlighting strong quarterly performance and growth in AI applications. Core Insights - Baidu's Q3 2024 revenue reached 33.6 billion yuan, with core revenue at 26.5 billion yuan and a core net profit of 7.54 billion yuan, reflecting a year-on-year growth of 17%, surpassing market expectations [1] - The daily call volume of Baidu's Wenxin large model has surged to 1.5 billion, a nearly 30-fold increase from 50 million calls reported in Q4 of the previous year [2][7] - Baidu plans to launch a new version of the Wenxin large model in early 2025 [3][4] Summary by Sections Financial Performance - In Q3 2024, Baidu's intelligent cloud revenue reached 4.9 billion yuan, marking an 11% year-on-year increase, with AI-related revenue exceeding 11% of total revenue [11] - The user base for Wenxin Yiyan has grown to 430 million, a more than 500% increase within a year [9] AI Strategy and Applications - Baidu has established a long-term strategy driven by AI, focusing on application-driven development to enhance usability and effectiveness of AI models [8] - The introduction of the no-code development tool "Miao Da" allows users to build systems through natural language interaction, attracting over 5,000 enterprises for testing [12][13] Market Position and Ecosystem - Baidu's intelligent cloud holds a 26.4% market share in China's AI public cloud service market, maintaining the top position for five consecutive years [11] - The integration of AI capabilities into Baidu's products, such as Baidu Wenku, has led to a 300% year-on-year increase in monthly active users for AI features [16]

Investment Rating - The report maintains a "Buy" rating for Baidu Group-SW (09888.HK) [3] Core Insights - The company is undergoing an AI-driven transformation, but its advertising business still requires improvement. The intelligent cloud segment shows steady growth, and the core profits of Baidu remain on an upward trend [4] Financial Performance Summary - In Q3 2024, Baidu reported revenues of 33.6 billion yuan, a year-on-year decrease of 3%. The Non-GAAP net profit for the same period was 5.9 billion yuan, down 19% year-on-year [4] - Baidu's core revenue reached 26.5 billion yuan in Q3 2024, a slight decline of 0.29% year-on-year, while the Non-GAAP net profit attributed to the core business was 7.54 billion yuan, an increase of 17% year-on-year [4] - Online marketing revenue was 18.8 billion yuan, down 4% year-on-year, impacted by a weak macro environment. Non-online marketing revenue was 7.7 billion yuan, up 12% year-on-year, primarily driven by the intelligent cloud business [4] AI and Intelligent Driving Developments - The daily API call volume for the Wenxin large model reached 1.5 billion, with the user base for Wenxin Yiyan reaching 430 million. The intelligent cloud platform has assisted clients in fine-tuning models for 33,000 instances and developing 770,000 enterprise applications [4] - The autonomous driving service "Luo Bo Kuaipao" saw a 20% year-on-year increase in order volume, reaching 988,000 orders in Q3 2024, with a market share exceeding 70% for fully autonomous driving orders [4] iQIYI Performance - iQIYI's revenue in Q3 2024 was 7.2 billion yuan, down 10% year-on-year, with a Non-GAAP net profit of 480 million yuan, a decrease of 23% year-on-year. Membership revenue fell by 9% to 4.4 billion yuan, while advertising revenue dropped by 20% to 1.3 billion yuan [4] Profit Forecast and Valuation - The report forecasts Non-GAAP net profits for Baidu of 26.6 billion yuan, 28.2 billion yuan, and 30.9 billion yuan for 2024, 2025, and 2026 respectively. The current stock price corresponds to a Non-GAAP PE of 8.17, 7.71, and 7.04 for the respective years [4]