Tianfeng Securities released a research report stating that Baidu's Q1 24 Core revenue was 23.8 billion yuan, up 3.5% year-on-year, of which online marketing revenue was 17.1 billion yuan, up 3% year-on-year. The main reason for the performance not meeting expectations was that the macroeconomic recovery was not as good as expected, and the visibility of advertising clients' improvement was limited. It is expected that the growth of online marketing revenue will remain relatively stable in the next few quarters.
The company announced its cooperation with Samsung and Honor smart phone manufacturers for the Wenxin Model in Q4 23, and added Oppo, vivo, Xiaomi and other smart phone manufacturers, as well as Lenovo and NIO Inc in the field of personal computers and electric vehicles in Q1 24. It is expected that this cooperation project will continue to be one of the incremental revenue contributions to AI cloud in the future.
The bank predicts that based on the strong performance of Baidu this quarter, it may reflect the resilience of its operations under the complex macroeconomic situation and the steady development of its AI business. Adjusting the revenue forecast for FY2024-2026 to 138.9/153.2/170.3 billion yuan, compared to the previous values of 139.4/153.8/171.2 billion yuan, and the Non-GAAP operating profit was adjusted to 28/32/35.5 billion yuan, compared to the previous values of 27.9/32.1/35.7 billion yuan. Based on the SOTP valuation, Baidu's 2024 advertising, cloud business, and iQiyi non-advertising revenue are valued at 8x P/E, 3x P/S, and 14x PE, respectively, with a target price of HKD139 and a "buy" rating maintained.