BIDU(09888) 开源证券·2024-05-20 03:32Investment Rating - The investment rating for Baidu Group-SW is maintained at "Buy" [2][6]. Core Insights - The report indicates that Baidu's core advertising revenue is under pressure due to macroeconomic factors, with a slight downward adjustment in non-GAAP net profit forecasts for 2024-2026 to 27.4 billion, 31.0 billion, and 34.0 billion CNY respectively, reflecting year-on-year growth rates of -4.6%, 12.8%, and 9.9% [6]. - The first quarter of 2024 saw Baidu's revenue grow by 1.2% year-on-year, aligning with Bloomberg consensus expectations, while non-GAAP net profit increased by 22%, surpassing expectations due to improved operational efficiency in Baidu's core and iQIYI segments [7]. - The report highlights that while short-term advertising growth is constrained, the long-term potential of AI-driven advertising and cloud services is expected to enhance revenue contributions significantly [8]. Summary by Sections Financial Performance - In Q1 2024, Baidu's core online marketing revenue grew by 3%, which is below the overall internet advertising market growth of 4.6% in China [7]. - The AI and smart cloud segment saw an increase in demand, with AI contributions rising to approximately 6.9% of total demand, up by 2.1 percentage points quarter-on-quarter [7]. - iQIYI's revenue declined by 5% year-on-year, with a non-GAAP net profit margin of 10.6% [7]. Market Conditions - The advertising business is facing growth challenges due to macroeconomic conditions, particularly affecting offline economies and SME client spending [8]. - Despite these challenges, AI is expected to improve advertising conversion rates, with projected incremental revenue from AI-driven advertising and cloud services reaching several billion CNY in 2024 [8]. Valuation Metrics - The current stock price is 110.90 HKD, with projected P/E ratios for 2024-2026 at 10.8, 9.7, and 9.0 times respectively [6][9]. - Non-GAAP net profit margins are forecasted to be 19.5%, 20.6%, and 21.3% for 2024, 2025, and 2026 respectively, indicating a stable profit outlook [9].