EBSCN·2024-11-11 06:59Investment 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 88.95 HKD [3]. Core Views - Baidu Group's total revenue for Q3 2024 is expected to decline by 3.9% year-on-year to 33.12 billion RMB, with core revenue declining by 2.0% to 26.04 billion RMB. The core non-GAAP operating profit is projected to be 6.39 billion RMB, down 4.2%, resulting in an operating margin of 24.5% [1]. - The online marketing business remains weak, with a 5.0% decline in online marketing services to 18.72 billion RMB, primarily due to a sluggish macro environment and limited marketing investments from major advertisers [1]. - Non-online marketing revenue is expected to grow by 6.2% year-on-year to 7.33 billion RMB, driven by improvements in cloud services and adjustments in the management of the document and library business [1]. - Baidu's AI initiatives are progressing well, with significant developments in AI infrastructure and applications, including the launch of new AI products and platforms [1]. Summary by Sections Revenue Forecast - Total revenue for 2024 is projected at 132.995 billion RMB, with a slight decline of 1.19% year-on-year. The core revenue is expected to be 103.596 billion RMB, showing minimal growth [2]. Profitability Metrics - Non-GAAP net profit for 2024 is forecasted at 26.478 billion RMB, reflecting a decrease of 7.89% year-on-year. The non-GAAP EPS is projected to be 9.44 RMB [2]. AI Business Developments - Baidu's AI business is expected to show healthy growth, with significant advancements in AI applications and infrastructure, including the introduction of the "百舸 AI 异构计算平台 4.0" and "千帆大模型平台 3.0" [1][8]. Market Position - Baidu's market share in the intelligent PPT industry reached 80% by June 2024, with over 47 million visits to its AI features by September 2024 [1]. Valuation Metrics - The report assigns a valuation of 12.0x PE for advertising, 4.5x PS for smart cloud, and 4.5x PS for other businesses, maintaining a target price of 165 HKD [1].