BOCOM International·2025-07-23 09:24Investment Rating - The report assigns a "Buy" rating for Baidu (BIDU US) with a target price of $99.00, indicating a potential upside of 7.1% from the current price of $92.45 [2][12]. Core Insights - Baidu's core revenue is expected to remain flat in 2025, with operating profit projected to decline by 29% year-on-year. The transformation of AI search prioritizes user experience, which continues to pressure advertising revenue. The cloud business is anticipated to benefit from demand for AI and large models, with a projected revenue growth of 25% year-on-year [1][6]. - The report highlights the uncertainty surrounding advertising revenue and emphasizes the ongoing exploration of AI monetization as a core objective for the industry. The cloud and autonomous driving sectors are positioned for growth, with expectations for valuation enhancement in the future [1][6]. Financial Forecast Adjustments - Revenue projections for 2025 have been adjusted to RMB 131,591 million, a decrease of 2.9% from previous estimates. The growth rate is expected to decline to -1.2% [5]. - Core revenue from Baidu is forecasted at RMB 104,472 million for 2025, reflecting a 2.6% decrease from prior estimates. The operating profit margin is expected to decline by 1.6 percentage points to 16.2% [5][6]. - The cloud business is projected to generate RMB 27,138 million in revenue by 2026, with a growth rate of 7.2% [5][7]. Revenue Breakdown - The report provides a detailed breakdown of revenue sources, with online marketing services expected to generate RMB 63,717 million in 2025, down from previous estimates [7][8]. - The autonomous driving and new business segment is projected to grow by 40% year-on-year, reaching RMB 13,618 million by 2026 [7][8]. Profitability Metrics - The adjusted operating profit for 2025 is forecasted at RMB 18,098 million, with an adjusted operating profit margin of 13.8% [5][6]. - The adjusted net profit is expected to be RMB 17,419 million for 2025, reflecting a decrease of 10.5% from previous forecasts [5][6]. Market Position and Future Outlook - Baidu's autonomous driving initiative is improving, with plans to deploy thousands of autonomous vehicles in collaboration with Uber, initially in the Middle East and Asia [1][6]. - The report emphasizes the importance of monitoring the sustainability of cloud revenue growth and the global rollout of Robotaxi services as key factors for future valuation [1][6].