20260302-招银国际-In_progress_to_provide_greater_visibility_on_AI-powered_business_growth_and_enhance_shareholder_return_8页_702kb

Baidu (BIDU US) Summary

Core Content

Baidu released its 4Q25 financial results, with the following key highlights:

• Baidu General Business revenue reached RMB26.1bn, down 5.7% YoY, in line with Bloomberg consensus. Non-GAAP operating profit (OP) was RMB2.8bn, down 39% YoY but 12% ahead of consensus.
• AI-powered business growth showed strong momentum:
  • AI-native marketing services revenue increased by 110% YoY to RMB2.7bn.
  • AI Cloud infrastructure revenue totaled RMB5.8bn, with subscription-based revenue from AI accelerator infrastructure rising 143% YoY.
  • AI applications revenue for 2025 reached RMB10.2bn, up 5% YoY.

Key Drivers for Stock Price

The following factors are expected to positively impact Baidu's stock price:

1. Reacceleration in overall ads revenue growth
2. Robust cloud revenue growth
3. Enhancement of shareholder return
4. Spin-off and separate listing of the chip business arm as an additional catalyst.

Financial Performance Overview

Revenue and Profitability

Operating Margins

Valuation and Target Price

• Target Price: US$161.70 per ADS (was US$150.70), reflecting a 29.9% upside from the current price of US$124.44.
• Valuation Methodology:
  1. Baidu General Business: US$35.7, based on 5.0x 2026E non-GAAP PE.
  2. Apollo ASD: US$0.3, based on 2.0x 2030E revenue, discounted back to 2026E using a 13.0% WACC.
  3. Baidu Cloud: US$62.9, based on 4.6x 2026E PS.
  4. Net Cash and Other Investments: US$62.8, after applying a 30% holding discount to the valuation of US$89.7 per ADS.

Shareholding and Performance

• Shareholding Structure:

  • Yanhong Li: 22.9%
  • Primecap Management: 3.9%

• Share Performance:

  • 1-month: -21.1% (Absolute), -17.8% (Relative)
  • 3-month: +7.0% (Absolute), +8.5% (Relative)
  • 6-month: +38.5% (Absolute), +30.7% (Relative)

• 12-month Price Performance:

  • BIDU US: From US$70 to US$124.44, with the 12-month chart showing a general upward trend.

Forecast and Valuation Adjustments

• Revenue Forecast:

  • 2026E: RMB135.0bn, down 1.4% from previous forecast.
  • 2027E: RMB142.0bn, down 1.4%.
  • 2028E: RMB148.5bn, unchanged.

• Non-GAAP Net Profit Forecast:

  • 2026E: RMB17.4bn, down 9.5%.
  • 2027E: RMB22.8bn, down 1.1%.
  • 2028E: RMB26.8bn, unchanged.

• Valuation Adjustments:

  • The valuation window was rolled over to 2026E.
  • The exchange rate assumption was adjusted from USD:RMB=1:7.2 to 1:7.0.

Share Repurchase and Dividend Policy

• Baidu authorized a new share repurchase program in Feb 2026, allowing up to US$5bn in share repurchases through Dec 31, 2028.
• The dividend policy was approved for the first time, which may include regular and/or special distributions of dividends.

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.
• NOT RATED: Stock not rated by CMBIGM.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Analyst Certification

• The analyst certifies that all views expressed reflect personal opinions and that compensation is not directly or indirectly related to the specific views in this report.
• The analyst and their associates have not traded in the stocks covered within 30 days before or 3 business days after the report's issue date.

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• A wholly owned subsidiary of CMB International Capital Corporation Limited, itself a subsidiary of China Merchants Bank.
• Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong.
• Contact: Tel: (852) 3900 0888, Fax: (852) 3900 0800.