BIDU(09888) 国信证券·2024-05-20 00:32Investment Rating - The investment rating for Baidu Group-SW (09888.HK) is "Buy" [1][3]. Core Insights - Baidu Group's total revenue grew by 1% year-on-year to 31.5 billion yuan in Q1 2024, with adjusted net profit increasing by 22% to 7 billion yuan [1][4]. - The core revenue from Baidu increased by 4% to 23.8 billion yuan, while iQIYI's revenue decreased by 5% to 7.9 billion yuan [1][4]. - The online marketing revenue for Baidu's core business was 17 billion yuan, reflecting a 2% year-on-year growth, driven by the integration of generative AI in search results [1][6]. - The intelligent cloud business maintained double-digit growth, with AI contributing 6.9% to the total cloud revenue [1][9]. - The report emphasizes the potential of AI technology to drive growth in search advertising and cloud services, maintaining profit forecasts for 2024-2026 [1][12]. Financial Performance Summary - Total revenue for 2024 is projected to reach 142.1 billion yuan, with a year-on-year growth of 5.5% [2]. - Adjusted net profit for 2024 is estimated at 28.6 billion yuan, with a slight decrease of 0.6% compared to 2023 [2]. - The adjusted EPS for 2024 is forecasted to be 10.19 yuan, with a PE ratio of 9.4 [2][14]. - The EBIT margin is expected to be 14.7% in 2024, while the ROE is projected at 6.8% [2][14]. Business Segment Analysis - Baidu's core advertising revenue grew by 2%, with 11% of search results generated by AI, although monetization remains a challenge [1][6]. - The intelligent cloud revenue reached 4.7 billion yuan, marking a 12% increase year-on-year, primarily driven by generative AI and foundational models [1][9]. - Non-online marketing revenue increased by 6% to 6.8 billion yuan, indicating a diversified revenue stream beyond traditional advertising [1][4]. User Engagement and AI Integration - Baidu's app reached 676 million monthly active users in March 2024, a 3% increase year-on-year [1][6]. - The introduction of features like Agent Builder allows advertisers to create customized ERNIE agents, enhancing user interaction and engagement [1][10]. - The report highlights a significant increase in paid users for Baidu Wenku, reflecting the growing adoption of AI-driven services [1][11].