BIDU(US:BIDU) BOCOM International·2025-05-22 13:30Investment Rating - The report assigns a "Buy" rating for Baidu (BIDU US) with a target price of $99.00, indicating a potential upside of 15.8% from the current price of $85.48 [2][4][14]. Core Insights - Baidu's cloud business has significantly exceeded expectations, while the monetization of AI search is still anticipated to take time [2][7]. - The first quarter of 2025 showed a total revenue of 32.5 billion RMB, a year-on-year increase of 3%, surpassing market expectations by 5% [7]. - Adjusted net profit for the same period was 6.5 billion RMB, with a net profit margin of 20%, also exceeding expectations [7]. - The report highlights a strong performance in the intelligent cloud segment, which grew by 42% year-on-year, contributing 26% to core revenue [7][8]. - Advertising revenue, however, declined by 6% year-on-year, impacted by the ongoing transformation of AI search [7][8]. Financial Overview - Revenue projections for Baidu are as follows: 134,598 million RMB in 2023, 133,125 million RMB in 2024, and an estimated 135,508 million RMB in 2025, reflecting a slight decline in 2024 [3][15]. - Net profit is projected to decrease from 28,747 million RMB in 2023 to 21,014 million RMB in 2025, indicating a significant drop [3][15]. - The report anticipates a continued decline in advertising revenue, projecting a 9% decrease for the full year 2025 [7][8]. - The cloud revenue growth rate is expected to be 30% for the year, up from a previous estimate of 20% [7][8]. Business Segments Performance - The core business revenue for Baidu is projected to be 104,712 million RMB in 2024 and 107,243 million RMB in 2025, with online marketing services expected to decline [9]. - The intelligent cloud segment is expected to grow significantly, with revenue estimates of 21,747 million RMB in 2024 and 27,941 million RMB in 2025 [9]. - The autonomous driving and new business segment is projected to reach 10,117 million RMB in 2024 and 13,247 million RMB in 2025, showing strong growth [9]. Valuation Metrics - The report notes that Baidu's current price corresponds to a P/E ratio of 10.4 times for 2025 and an ex-cash P/E ratio of 6.3 times [7]. - The target price adjustment reflects a valuation based on a 3x sales multiple for Baidu's cloud business and an 8x P/E for traditional search advertising [7][8].