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Expect mild ads revenue growth in 1Q24
BIDUBIDU(BIDU) 招银国际·2024-04-10 16:00

Investment Rating - The report maintains a "BUY" rating for Baidu with a target price of US183.20,slightlyadjustedfromtheprevioustargetofUS183.20, slightly adjusted from the previous target of US186.20, indicating a potential upside of 77.8% from the current price of US103.05[2][3].CoreInsights−BaiduCoreisexpectedtoachievemildadsrevenuegrowthin1Q24,primarilydrivenbystrongperformanceintravelande−commercesectors,althoughthisispartiallyoffsetbyweakerofflineverticalsduetomacroeconomicconditions[2].−ThecompanyisfocusingoninvestingingenerativeAIopportunitiestoenhancelong−termrevenueandearningsgrowthwhileimprovingoperationalefficiencyinnon−corebusinesses[2].−ThepaceofmonetizationforgenerativeAI−relatedadsandcloudrevenueisidentifiedasakeycatalystforfuturegrowth[2].FinancialPerformanceSummary−For1Q24,BaiduCoreisestimatedtogeneraterevenueofRMB23.5billion,reflectinga2103.05 [2][3]. Core Insights - Baidu Core is expected to achieve mild ads revenue growth in 1Q24, primarily driven by strong performance in travel and e-commerce sectors, although this is partially offset by weaker offline verticals due to macroeconomic conditions [2]. - The company is focusing on investing in generative AI opportunities to enhance long-term revenue and earnings growth while improving operational efficiency in non-core businesses [2]. - The pace of monetization for generative AI-related ads and cloud revenue is identified as a key catalyst for future growth [2]. Financial Performance Summary - For 1Q24, Baidu Core is estimated to generate revenue of RMB23.5 billion, reflecting a 2% year-over-year increase, but 3% below Bloomberg consensus estimates [2]. - The forecast for Baidu Core ads revenue is RMB16.9 billion, also up 2% year-over-year, driven by travel and e-commerce, but impacted by weaker offline performance post-Chinese New Year [2]. - Non-GAAP operating profit for 1Q24 is projected at RMB5.1 billion, down 5% year-over-year, resulting in a non-GAAP operating profit margin of 21.8% [2][3]. Revenue and Profit Forecast - Revenue projections for Baidu are as follows: RMB141.6 billion for FY24E, RMB150.9 billion for FY25E, and RMB159.4 billion for FY26E, with slight downward revisions compared to previous estimates [6]. - Non-GAAP net profit is expected to be RMB27.0 billion for FY24E, with a decrease in growth rate due to increased investments in AI [6]. - The adjusted net profit for FY24E is forecasted at RMB27.0 billion, reflecting a 6% decrease from the previous year [3][6]. Valuation Breakdown - The SOTP-based valuation of US183.2 per ADS includes: - US68.1forBaiduCoreadsbasedona7.0x2024Enon−GAAPPE−US68.1 for Baidu Core ads based on a 7.0x 2024E non-GAAP PE - US1.8 for Apollo ASD based on a 2.0x 2030E revenue - US35.2forBaiduCloudbasedona4.3x2024EPS−US35.2 for Baidu Cloud based on a 4.3x 2024E PS - US65.0 in net cash - US$13.2 for iQIYI and other investments, applying a 30% holding discount [7][9].