20230607-招银国际-Takeaway_from_field_trip_6页_1023kb

Baidu (BIDU US) Equity Research Summary

Key Takeaways from Analyst Meeting and Field Trip:

• Ads business recovery is on track due to offline activity resumption; management targets better than GDP growth for 2023, supported by factors like rising search volumes, higher video content eCPM, and user growth.
• ERNIE BOT has early-mover advantage from Baidu's search data and full-stack AI capabilities; monetization expected post-regulatory approval.
• Apollo autonomous driving services available in Beijing, Wuhan, Chongqing, and partially driverless in Yizhuang, Beijing; revenue contribution ramping up with cost optimization and more approvals.

Analyst Recommendation:

• Reiterate BUY rating with SOTP-based target price of US$199.40 per ADS.
• Up/Downside: +45.1% from current price of US$137.45.
• Key catalysts include better-than-expected ad recovery, ERNIE BOT monetization, and increased revenue from Apollo Self-Driving (ASD).

Financial Highlights:

• Revenue forecast: CAGR growth in core business and cloud segments; detailed SOTP valuation: US$65.0 for core business (ex-Apollo and Cloud), US$22.8 for Apollo ASD, US$40.3 for Baidu Cloud.
• Financial metrics: P/E ratio expected to normalize around 17.7x for 2023, with ROE improving to sustainable levels.

Growth Outlook:

• Ads business: Anticipated 15.7% YoY growth in Q2 2023 core search/ads; catalysts include offline activities and content mix.
• Autonomous driving: ASD projected to reach RMB11.4bn sales; Apollo Go rides exceeding 2 million in recent quarters.
• Cloud business: Profitability sustainable through project phasing and standardized AI solutions.

Risks and Disclosures:

• Disclaimer: Investment involves risks; past performance not indicative of future results; report based on publicly available data and analyst views.
• CMBIGM certifications and conflicts noted; not suitable for all investors.