20250415-招银国际-Expecting_steady_cloud_revenue_growth_6页_934kb

Baidu (BIDU US) Summary

Core Content

Baidu is expected to experience steady cloud revenue growth in 1Q25E, with a revenue forecast of RMB24.0bn, up 1% YoY, and slightly better than the Bloomberg consensus. The growth is primarily attributed to strong AI-related demand in the cloud sector.

Baidu Core business is anticipated to generate a non-GAAP operating profit of RMB4.5bn for 1Q25E, 1% better than the consensus, translating into a non-GAAP operating margin of 18.8%. While the current margin is under pressure due to declining ads revenue and incremental AI-related investments, a sequential recovery in both ads revenue and operating margin is expected starting from late-2Q25E as monetization of AI-related search results begins.

The ads business is expected to see a mild recovery along with macroeconomic improvements, with a slightly narrower YoY decline of -5.9% in 1Q25E compared to -6.5% in 4Q24 and +2.7% in 1Q24. Although the YoY growth will take time to return to a positive trajectory, it is expected to hit bottom in 1Q25E and recover through 2Q-4Q25E.

Baidu Cloud is projected to maintain a strong revenue growth momentum, with a 26% YoY increase in 1Q25E, consistent with the 26% growth forecast for 2025E. This growth is driven by the rising demand for AI-related cloud services.

The company has revised its forecasts for 2025-2027E, trimming total revenue by 1% and non-GAAP net profit by 0-1%, mainly due to the downward revision of iQIYI revenue and earnings. The SOTP-based target price has been adjusted to US$146.7 from US$149.2, reflecting the updated investment valuation, which translates into a 13.9x 2025E non-GAAP PE.

Key Financials

Revenue

• FY23A: RMB134,598 mn
• FY24A: RMB133,125 mn
• FY25E: RMB137,622 mn
• FY26E: RMB146,452 mn
• FY27E: RMB154,661 mn

YoY Revenue Growth

• FY23A: 3.4%
• FY24A: 6.4%
• FY25E: 5.6%

Adjusted Net Profit

• FY23A: RMB28,747 mn
• FY24A: RMB27,002 mn
• FY25E: RMB26,944 mn
• FY26E: RMB28,062 mn
• FY27E: RMB30,243 mn

YoY Adjusted Net Profit Growth

• FY23A: 4.2%
• FY24A: 7.8%
• FY25E: -0.2%

EPS (Adjusted)

• FY23A: RMB77.04
• FY24A: RMB80.23
• FY25E: RMB86.47

P/E Ratio

• FY23A: 9.8x
• FY24A: 9.4x
• FY25E: 8.6x

ROE

• FY23A: 7.6%
• FY24A: 7.1%
• FY25E: 7.0%

SOTP Valuation

• Baidu Core (ex-Apollo and Cloud): US$51.8 per ADS, based on 5.0x 2025E non-GAAP PE
• Apollo ASD: US$0.3 per ADS, based on 2.0x 2030E revenue, discounted at 13.0% WACC
• Baidu Cloud (ex-ASD): US$37.6 per ADS, based on 3.4x 2025E PS
• Net Cash, iQIYI and Other Investments: US$57.1 per ADS, with a 30% holding discount applied to the per share valuation of US$81.5

Total Target Price per ADS: US$146.7
Number of ADS Outstanding: 350 mn
Total Baidu Valuation: US$51,305 mn

Risks

1. Slower-than-expected ramp-up in revenue generation from Gen-AI related business.
2. Slower-than-expected margin expansion.

Analyst Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• HOLD: Stock with potential return of +15% to -10% over next 12 months
• SELL: Stock with potential loss of over 10% over next 12 months

Shareholding Structure

• Robin Yanhong Li: 16.5%

Stock Performance

• 1-mth: -9.1%
• 3-mth: 4.6%
• 6-mth: -9.3%

Market Data

• Market Cap (US$ mn): 29,812.7
• Avg 3 mths t/o (US$ mn): 459.6
• 52w High/Low (US$): 115.13/76.86
• Total Issued Shares (mn): 349.8

CMBIGM Ratings

• BUY: Indicates strong potential for growth
• HOLD: Indicates moderate potential for return
• SELL: Indicates risk of loss

Important Disclosures

This report is prepared by CMB International Global Markets Limited and is not intended for general distribution. It is not an offer or solicitation to buy or sell any security. The information is subject to change and may not be suitable for all investors. Investors are advised to consult with a professional financial advisor before making investment decisions.