Soochow Securities·2024-05-19 10:02Investment Rating - The report maintains a "Buy" rating for Baidu Group-SW (09888.HK) [1] Core Insights - Baidu's Q1 2024 performance exceeded market expectations, with revenue in line with forecasts and adjusted net profit surpassing estimates [2][3] - The company's core operations have shown improved efficiency, with AI investments positively impacting cloud revenue growth [3][4] Summary by Sections Performance Overview - In Q1 2024, Baidu reported total revenue of 31.5 billion yuan, a year-on-year increase of 1.2%. Non-GAAP operating profit reached 6.7 billion yuan, up 3.8% year-on-year, exceeding market expectations of 5.7 billion yuan. Non-GAAP net profit was 7 billion yuan, reflecting a 22.4% year-on-year growth, also above the anticipated 5.5 billion yuan [2][3] Operational Efficiency - Baidu's core Non-GAAP gross margin, operating margin, and net margin for Q1 2024 were 59.0%, 23.5%, and 27.8%, respectively, outperforming Bloomberg consensus estimates. The company continues to optimize operational efficiency, with R&D expense ratio increasing by 0.3 percentage points to 15.1% due to higher depreciation and costs related to AI research [3] Advertising Business - The advertising segment faced short-term pressure, with core revenue of 23.8 billion yuan, a 4% year-on-year increase. Online marketing revenue was 17 billion yuan, up 3%, primarily affected by weak ad spending from the real estate sector. Baidu's app monthly active users reached 676 million in March 2024, a 3% increase year-on-year [3] Non-Advertising Business - Cloud computing revenue accelerated, growing 12% year-on-year in Q1 2024, driven by increased demand for model training and inference. The proportion of revenue from AI-related services rose significantly from 4.8% in Q4 2023 to 26.9% in Q1 2024. The smart driving business also showed growth, with a 25% increase in orders [3] Earnings Forecast and Investment Rating - The revenue forecasts for 2024-2026 have been slightly adjusted downwards, while Non-GAAP net profit estimates have been revised upwards. The 2024 Non-GAAP PE is projected at 9 times, reflecting the company's commitment to shareholder returns through ongoing share buybacks [4]