BIDU-百度：Solid cloud revenue growth a bright spot in the stage of business adjustment

Investment Rating - The report maintains a "BUY" rating for Baidu, indicating a potential return of over 15% over the next 12 months [3][20]. Core Insights - Baidu is expected to experience a 4.8% year-over-year decline in total revenue for 4Q24, with a non-GAAP net income of RMB4.7 billion, influenced by a one-off impact from an equity investee [1][7]. - Cloud revenue growth is anticipated to be a bright spot, driven by strong demand in GPU cloud services, while the recovery pace of advertising revenue remains critical [1][7]. - The target price has been adjusted down by 6% to US $144.6, reflecting a more subdued recovery in the advertising business [1][11]. Revenue and Profitability - For FY24E, total revenue is projected at RMB132.3 billion, a slight decline from FY23A's RMB134.6 billion, with a forecasted growth of 3.2% in FY25E [2][9]. - Adjusted net profit is expected to decrease by 13% in FY24E to RMB25.0 billion, with a recovery to RMB26.0 billion in FY25E [2][9]. - The adjusted EPS for FY24E is forecasted at RMB71.47, with a consensus EPS of RMB72.60 for the same period [2][9]. Segment Performance - Baidu Core is projected to generate revenue of RMB26.9 billion in 4Q24, down 2.3% year-over-year, primarily due to an 8% decline in core advertising revenue [7][8]. - The cloud business is expected to grow by 13% year-over-year in 4Q24, improving from previous quarters, driven by AI GPU-related revenue [7][8]. Valuation Metrics - The SOTP-based target price of US$ 144.6 per ADS translates to a 14x 2025E non-GAAP PE, or 7x if excluding net cash [11][12]. - The valuation breakdown includes US $49.1 for Baidu Core, US$ 0.3 for Apollo ASD, and US $32.6 for Baidu Cloud [11][12]. Cash Position - As of the end of 3Q24, Baidu had approximately RMB144.5 billion in cash on hand, equating to about US$ 57 per ADS [1][7].