Shenwan Hongyuan Securities·2025-12-28 14:17Investment Rating - The report upgrades the investment rating of Baidu Group to "Buy" with a target price of HKD 172.54 per share, indicating an upside potential of 44% [6][2]. Core Insights - Baidu is positioned to benefit from the accelerating demand for AI cloud services, with significant growth in its intelligent cloud business and advancements in its Kunlun chip technology [5][8]. - The company has achieved a market-leading position in AI large model solutions, capturing a 16.6% market share in the first half of 2025 [8][38]. - The report anticipates Baidu's overall revenue for 2025-2027 to be RMB 1285 billion, RMB 1331 billion, and RMB 1410 billion, respectively, with corresponding growth rates of -3%, 4%, and 6% [7][6]. Financial Data and Profit Forecast - Revenue projections for Baidu Group are as follows: - 2023: RMB 1346 billion - 2024: RMB 1331 billion - 2025E: RMB 1285 billion - 2026E: RMB 1331 billion - 2027E: RMB 1410 billion - Non-GAAP net profit estimates are: - 2023: RMB 287 billion - 2024: RMB 270 billion - 2025E: RMB 176 billion - 2026E: RMB 203 billion - 2027E: RMB 220 billion - Adjusted earnings per share are projected to be: - 2023: RMB 10.28 - 2024: RMB 9.65 - 2025E: RMB 6.31 - 2026E: RMB 7.27 - 2027E: RMB 7.87 [4][7]. Industry Overview - The AI cloud market is experiencing rapid growth, with major players like Alibaba and Tencent increasing their capital expenditures significantly since Q3 2024, indicating a competitive landscape [5][14]. - Baidu's intelligent cloud revenue reached RMB 62 billion in Q3 2025, with a year-on-year growth of 31%, contributing to 37% of Baidu's core revenue [28][32]. - The report highlights that Baidu's full-stack AI capabilities, including its self-developed Kunlun chips and comprehensive AI solutions, provide a competitive edge in the market [8][46]. Product Development and Market Position - Baidu's Kunlun chip series is set to expand with the launch of M100 and M300 chips, aimed at enhancing performance for large-scale AI model training and inference [49][50]. - The company has established a strong presence in various sectors, including internet, finance, and energy, with significant deployments of its AI solutions [54][55]. - Baidu's AI applications, such as its intelligent agents and cloud services, are gaining traction, with a total monthly active users (MAU) of nearly 300 million for its core applications [38][8].