研究报告全文：20Oct2023CMBInternationalGlobalMarketsEquityResearchCompanyUpdateBaiduBIDUUSTakeawayfrom2023BaiduWorldConferenceTargetPriceUS19940Weattended2023BaiduWorldConferenceon17OctOurkeytakeawaysarePreviousTPUS201001Baiduunveiledthe40versionofErnielargelanguagemodelLLMandisUpDownside665integratinggenerativeAIacrossallproductstoenhanceuserexperiencewhichCurrentPriceUS11976shallenhanceBaidusmonetizationcapabilityoverthelong-runinourviewand2BaiduCloudhasaccumulatedstrongAIinfrastructurewhichenablesmoreChinaInternetcost-efficientsolutionstoeasecomputingpowercostpressureAlthoughmacroSaiyiHECFAheadwindsmayweighonshort-termrevenuegrowthofbothadsandcloud85239161739businessesandadditionalinvestmenttosupportlarge-scaleuseofLLMmayhesaiyicmbicomhksqueezemarginswearemorepositiveonthelong-termdevelopmentprospectsofBaiduaidedbytheon-trackdevelopmentofLLMToaccountforYeTAOshort-termmacroheadwindsonitsbusinesswefine-tuneourSOTP-basedTPfranktaocmbicomhktoUS1994wasUS2010MaintainBUYBaiduunveiled40versionofErnieLLMBaidulaunchedthe40versionJiSHICFAofErnieLLMSincebeingopenforpublicuseinAugustErniehasamassed8523761872845mnusers54mndevelopers4300scenarios825applicationsand500shijicmbicomhkplug-insBaiduexpectstheLLMtobringvaluetoitsecosysteminthreeaspects1productcapabilityreconfiguration2anewbusinessecologyWentaoLUCFAfromenhancingtheROIofadvertisersand3developingplug-inecosystemluwentaocmbicomhktosolvetheneedsofusersinmultiplescenariosandbringmoretangibleStockDatabenefitstodevelopersTheincreasingadoptionofBaidusLLMbythird-MktCapUSmn420507partypartnersmayalsoenhancethegrowthprospectsofBaiduscloudAvg3mthstoUSmn919businessoverthelongruninourview52wHighLowUS160227657TotalIssuedSharesmn3511IntegrationofgenerativeAIacrossallproductstoenhanceuserSourceFactSetexperienceBaiduhasbeenintegratinggenerativeAIacrossallitsproductsincludingBaiduDriveBaiduWenkuandBaiduMapswhichinShareholdingStructureourviewwillenhanceuserexperienceandenhancemonetizationcapabilityRobinYanhongLi165SourceHKExoverthelongrunThenewversionofBaiduWenkuhasbeenwell-receivedbyuserssinceitslaunchinlateAugustcumulativeusershavesurpassedSharePerformance13mnandthecumulativepiecesofcontentgeneratedhassurpassedAbsoluteRelative20mn1-mth-106-953-mth-170-119BaiduCloudridingthetideofmulti-cloudadoptionandstrengthening6-mth-87-180itsexpertiseinAICloudManagementbelievesBaiduCloudhasstrongSourceFactSetcapabilityinhelpingcustomerslowercoststhroughadoptingLLMandend-to-endoptimizationBaidusAIinfrastructurehasbeenleadinginefficiency12-mthPricePerformanceandstabilityofLLMtrainingForexampleintermsofkeymetrics1Baidusvalidtrainingtimeaccountedfor96ofthetotaland2linearspeedupinparallelprocessingcanreach95ThestrongAIinfrastructureenablesBaidutoprovidemorecost-efficientsolutionstoitscustomerscomparedtoitsindustrypeersandlaysthefoundationforlong-termbusinessdevelopmentEarningsSummarySourceFactSetYE31DecFY21AFY22AFY23EFY24EFY25ERevenueRMBmn124493123675136247148020163790YoYgrowth1630710286107AdjustednetprofitRMBmn188300206800255667256307295752EPSAdjustedRMB53535890720971568175ConsensusEPSRMBnana710575218364PEx423401156161138ROE5134807175SourceCompanydataBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk20Oct20233Q23previewmacroheadwindsweighonshort-termrevenuegrowthandmarginFor3Q23weestimateBaiducouldachievetotalrevenueofRMB349bnup72YoY16lowerthanBloombergconsensusestimatesowningtolikelylower-than-expectedcloudrevenuegrowthourforecast-2YoYdraggedbythesmarttransportationverticalWeforecastBaidutohaverecordednon-GAAPnetincomeofRMB62bn4lowerthanconsensusestimatesForBaiduCoreweestimate3Q23revenueofRMB268bnup63YoYandnon-GAAPoperatingprofitofRMB64bnWeareexpectingaYoYdeclineinnon-GAAPOPMto238forBaiduCore3Q22264dueto1additionalinvestmentinuseracquisitionand2investmenttosupportlarge-scalepublicuseofLLMFigure1BaiduquarterlyresultsforecastsRMBbn4Q201Q212Q213Q214Q211Q222Q223Q224Q221Q232Q233Q23EBaiduGroupOnlinemarketing207181208211207169183199196180211214-YoYgrowth-032701784201-64123-53-566215473Otherservices96100105109124115114126135132130135YoYgrowth177209261354294144811599214714071Totalrevenue303281314319331284296325331311341349YoYgrowth482482041319310-5419009614972Grossprofit157131155158158129145163161160179179Operatingprofit502835232026345346505256Non-GAAPnetprofit694354514139555954578062YoYgrowth-25395-27-41-103163248446GPM520467493495477453488500488513525514OPM16499110725992115163139160153161Non-GAAPNPM227153171159123137187181162184235178BaiduCoreRevenue231205240247260214232252257230264268YoYgrowth6434227015312444-3723-127614063Non-GAAPOP805165584837516755546564Non-GAAPNP754959594638545849537759---YoYgrowth-2437851218386219-83-156338541228Non-GAAPOPM348247269236187172221264214233247238Non-GAAPNPM326238247237178178235228192229291221SourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE220Oct2023ChangesinforecastandvaluationFigure2BaiduforecastrevisionCurrentPreviousChangeRMBbn2023E2024E2025E2023E2024E2025E2023E2024E2025ERevenue136214801638136814871645-04-04-04GrossProfit6947528516917538530400-03Non-GAAPnetprofit256256296257257299-06-04-11GrossMargin50950851950550651904ppt02ppt01pptNon-GAAPnetmargin18817318118817318200ppt00ppt-01pptSourceCMBIGMestimatesFigure3BaiduCorebusinesssegmentforecastrevisionCurrentPreviousChangeRMBbn2023E2024E2025E2023E2024E2025E2023E2024E2025ERevenue104411361282105011431289-06-06-06Non-GAAPOperating237248289239250293-07-05-13ProfitNon-GAAPnetprofit240237272242238275-06-04-11Non-GAAPOPM174168176174168178-01ppt00ppt-02pptNon-GAAPNPM17616016617716016700ppt00ppt-01pptSourceCMBIGMestimatesSOTPvaluationofUS1994perADSWelowerourSOTP-basedtargetpricetoUS1994wasUS2010whichcomprisesperADS1US685forBaiduCoremainbusinessexcludingApolloandBaiduCloudmainlyincludingthecoresearchandfeedadsbusinessbasedon70x2023Enon-GAAPPETheliftinvaluationismainlyduetoaliftinnon-GAAPnetincomeforecast2US228forApolloASDbasedon20x2030Erevenueanddiscountedbackusinga130WACC3US369forBaiduCloudbasedonunchanged48x2023EPS4US582netcash5US130foriQIYIandotherinvestmentsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE320Oct2023Figure4BaiduSOTPvaluationValuationValuationNOPATValuationValuationValuationBaidusofBaidusSegmentUSDADSasofUSmnmethodmultipleRMBmnUSmnstakestaketotalUSmnCorebusinessandcash1Baiducoreex-ApolloandCloud347270x2023EPE168304243041000243046853442ApolloASD559268076100080762281143BaiduCloudex-ASD48x2023EPS90559130771000130773691854Netcash14295620643100020643582292Valuationofcorebusinessandcash661001864935iQIYIandstrategicinvestments1iQIYIMarketvalue3445149755152562722TripcomgroupMarketvalue177800256751082773783UxinMarketvalue50573917004HANDEnterpriseSolutionsMarketvalue931913465371025KuaishouMarketvalue23548334005311056306YusysTechnologiesMarketvalue1526022045111303ValuationofiQIYIandinvestments6582186ValuationofiQIYIandinvestmentswith30holding4607130discount65TotalBaiduvaluationUSmn70708NumberofADSoutstandingmn355ValuationperADSUS1994SourceCompanydataCMBIGMestimatesNoteAmericandepositaryshareADSiQIYIIQUSTripcomGroupTCOMUSUxinUXINUSHANDEnterprisesolution300170SHKuaishou1024HKYusysTechnologies300674SHPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE420Oct2023FinancialSummaryINCOMESTATEMENT2020A2021A2022A2023E2024E2025EYE31DecRMBmnRevenue107074124493123675136247148020163790Costofgoodssold551586431463935668757278178724Grossprofit519166017959740693737523985066Operatingexpenses375764966143829487225231457762SGAexpense180632472320514247972679229646RDexpense195132493823315239252552228116Operatingprofit143401051815911206512292527304ShareoflossesprofitsofassociatesJV224893219101001633261AdjustedEBITDA275042491429663341163670541940NetInterestincomeexpense225521303332435531143364Foreignexchangegainloss66010014841070856685Otherincomeexpense940310385737108310941105Pre-taxprofit230901077810112261572735632196Incometax406431872578558067997867Aftertaxprofit1902675917534205782055724329Minorityinterest344626352586813131638Netprofit22472102267559197091924422691Adjustednetprofit220201883020680255672563129575BALANCESHEET2020A2021A2022A2023E2024E2025EYE31DecRMBmnCurrentassets183342213315212850237106265170297523Cashequivalents35782368505315677741103628133103Restrictedcash7581082111330113301133011330Accountreceivables8668998111733100791094912116Othercurrentassets138134155663136631137957139262140974Non-currentassets149366166719178123176864179512182228PPE175082302723973280173201836109Intangibles8457894780952792143964Goodwill222482260522477224772247722477Othernon-currentassets101153112140123578123578123578123578Totalassets332708380034390973413970444682479751Currentliabilities683857448879630851378801090319Short-termborrowings301641685343534353435343Accountpayables367164138438014421814379844425Othercurrentliabilities286532893636273376143886940551Non-currentliabilities724808159473538650626369262883Long-termborrowings01262913722000Bondpayables603355577249461547075333752528Obligationsunderfinanceleases469355694810481048104810Deferredincome97129159159159159Othernon-currentliabilities735574955386538653865386Totalliabilities140865156082153168150199151702153202Sharecapital000000Capitalsurplus472134754847748479484814848348Retainedearnings135483163911175730201496230506263874Otherreserves310271488393839383938393Totalshareholdersequity185798218607231871257837287047320615Minorityinterest604553455934593459345934Totalequityandliabilities332708380034390973413970444682479751PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE520Oct2023CASHFLOW2020A2021A2022A2023E2024E2025EYE31DecRMBmnOperatingProfitbeforetaxation230901077810112261572735632196Depreciationamortization181801643814725570057425654Taxpaid406431872578558067997867Changeinworkingcapital1820718691167585836696569Others52011478420669718672267812Netcashfromoperations242002012226170393003422137226InvestingCapitalexpenditure5084108968286828682868286Acquisitionofsubsidiariesinvestments239624714000Netproceedsfromdisposalofshort-term48600000investmentsOthers1958620301435613010484Netcashfrominvesting27552314443944841683908370FinancingNetborrowings12390884068131372200Sharerepurchases1305475811925000Others6329221372348667357618Netcashfromfinancing5665233966390704957618NetchangeincashCashatthebeginningoftheyear3443936540476716523689071114958Exchangedifference2129431729000Cashattheendoftheyear36540476716523689071114958144433GROWTH2020A2021A2022A2023E2024E2025EYE31DecRevenue031630710286107Grossprofit1651590716185131Operatingprofit1274267513298110191Netprofit9925545261160724179Adjnetprofit2111459823603154PROFITABILITY2020A2021A2022A2023E2024E2025EYE31DecGrossprofitmargin485483483509508519Operatingmargin13484129152155167Adjnetprofitmargin206151167188173181ReturnonequityROE1285134807175GEARINGLIQUIDITYACTIVITIES2020A2021A2022A2023E2024E2025EYE31DecNetdebttoequityx050505060606Currentratiox272927283033Receivableturnoverdays270270316288256253Payableturnoverdays226521862235215921262017VALUATION2020A2021A2022A2023E2024E2025EYE31DecPE131423401156161138PEdiluted132432405158163140PB162013121110PCFPS155479171100121110SourceCompanydataCMBIGMestimatesNoteThecalculationofnetcashincludesfinancialassetsPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE620Oct2023DisclosuresDisclaimersAnalystCertificationTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportinwholeorinpartcertifiesthatwithrespecttothesecuritiesorissuerthattheanalystcoveredinthisreport1alloftheviewsexpressedaccuratelyreflecthisorherpersonalviewsaboutthesubjectsecuritiesorissuerand2nopartofhisorhercompensationwasisorwillbedirectlyorindirectlyrelatedtothespecificviewsexpressedbythatanalystinthisreportBesidestheanalystconfirmsthatneithertheanalystnorhisherassociatesasdefinedinthecodeofconductissuedbyTheHongKongSecuritiesandFuturesCommission1havedealtinortradedinthestockscoveredinthisresearchreportwithin30calendardayspriortothedateofissueofthisreport2willdealinortradeinthestockscoveredinthisresearchreport3businessdaysafterthedateofissueofthisreport3serveasanofficerofanyoftheHongKonglistedcompaniescoveredinthisreportand4haveanyfinancialinterestsintheHongKonglistedcompaniescoveredinthisreportCMBIGMoritsaffiliateshaveinvestmentbankingrelationshipwiththeissuerscoveredinthisreportinpreceding12monthsCMBIGMRatingsBUYStockwithpotentialreturnofover15overnext12monthsHOLDStockwithpotentialreturnof15to-10overnext12monthsSELLStockwithpotentiallossofover10overnext12monthsNOTRATEDStockisnotratedbyCMBIGMOUTPERFORMIndustryexpectedtooutperformtherelevantbroadmarketbenchmarkovernext12monthsMARKET-PERFORMIndustryexpectedtoperformin-linewiththerelevantbroadmarketbenchmarkovernext12monthsUNDERPERFORMIndustryexpectedtounderperformtherelevantbroadmarketbenchmarkovernext12monthsCMBInternationalGlobalMarketsLimitedAddress45FChampionTower3GardenRoadHongKongTel85239000888Fax85239000800CMBInternationalGlobalMarketsLimitedCMBIGMisawhollyownedsubsidiaryofCMBInternationalCapitalCorporationLimitedawhollyownedsubsidiaryofChinaMerchantsBankImportantDisclosuresTherearerisksinvolvedintransactinginanysecuritiesTheinformationcontainedinthisreportmaynotbesuitableforthepurposesofallinvestorsCMBIGMdoesnotprovideindividuallytailoredinvestmentadviceThisreporthasbeenpreparedwithoutregardtotheindividualinvestmentobjectivesfinancialpositionorspecialrequirementsPastperformancehasnoindicationoffutureperformanceandactualeventsmaydiffermateriallyfromthatwhichiscontainedinthereportThevalueofandreturnsfromanyinvestmentsareuncertainandarenotguaranteedandmayfluctuateasaresultoftheirdependenceontheperformanceofunderlyingassetsorothervariablemarketfactorsCMBIGMrecommendsthatinvestorsshouldindependentlyevaluateparticularinvestmentsandstrategiesandencouragesinvestorstoconsultwithaprofessionalfinancialadvisorinordertomaketheirowninvestmentdecisionsThisreportoranyinformationcontainedhereinhavebeenpreparedbytheCMBIGMsolelyforthepurposeofsupplyinginformationtotheclientsofCMBIGMoritsaffiliatestowhomitisdistributedThisreportisnotandshouldnotbeconstruedasanofferorsolicitationtobuyorsellanysecurityoranyinterestinsecuritiesorenterintoanytransactionNeitherCMBIGMnoranyofitsaffiliatesshareholdersagentsconsultantsdirectorsofficersoremployeesshallbeliableforanylossdamageorexpensewhatsoeverwhetherdirectorconsequentialincurredinrelyingontheinformationcontainedinthisreportAnyonemakinguseoftheinformationcontainedinthisreportdoessoentirelyattheirownriskTheinformationandcontentscontainedinthisreportarebasedontheanalysesandinterpretationsofinformationbelievedtobepubliclyavailableandreliableCMBIGMhasexertedeveryeffortinitscapacitytoensurebutnottoguaranteetheiraccuracycompletenesstimelinessorcorrectnessCMBIGMprovidestheinformationadvicesandforecastsonanASISbasisTheinformationandcontentsaresubjecttochangewithoutnoticeCMBIGMmayissueotherpublicationshavinginformationandorconclusionsdifferentfromthisreportThesepublicationsreflectdifferentassumptionpoint-of-viewandanalyticalmethodswhencompilingCMBIGMmaymakeinvestmentdecisionsortakeproprietarypositionsthatareinconsistentwiththerecommendationsorviewsinthisreportCMBIGMmayhaveapositionmakemarketsoractasprincipalorengageintransactionsinsecuritiesofcompaniesreferredtointhisreportforitselfandoronbehalfofitsclientsfromtimetotimeInvestorsshouldassumethatCMBIGMdoesorseekstohaveinvestmentbankingorotherbusinessrelationshipswiththecompaniesinthisreportAsaresultrecipientsshouldbeawarethatCMBIGMmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreportandCMBIGMwillnotassumeanyresponsibilityinrespectthereofThisreportisfortheuseofintendedrecipientsonlyandthispublicationmaynotbereproducedreprintedsoldredistributedorpublishedinwholeorinpartforanypurposewithoutpriorwrittenconsentofCMBIGMAdditionalinformationonrecommendedsecuritiesisavailableuponrequestForrecipientsofthisdocumentintheUnitedKingdomThisreporthasbeenprovidedonlytopersonsIfallingwithinArticle195oftheFinancialServicesandMarketsAct2000FinancialPromotionOrder2005asamendedfromtimetotimeTheOrderorIIarepersonsfallingwithinArticle492atodHighNetWorthCompaniesUnincorporatedAssociationsetcoftheOrderandmaynotbeprovidedtoanyotherpersonwithoutthepriorwrittenconsentofCMBIGMForrecipientsofthisdocumentintheUnitedStatesCMBIGMisnotaregisteredbroker-dealerintheUnitedStatesAsaresultCMBIGMisnotsubjecttoUSrulesregardingthepreparationofresearchreportsandtheindependenceofresearchanalystsTheresearchanalystwhoisprimaryresponsibleforthecontentofthisresearchreportisnotregisteredorqualifiedasaresearchanalystwiththeFinancialIndustryRegulatoryAuthorityFINRATheanalystisnotsubjecttoapplicablerestrictionsunderFINRARulesintendedtoensurethattheanalystisnotaffectedbypotentialconflictsofinterestthatcouldbearuponthereliabilityoftheresearchreportThisreportisintendedfordistributionintheUnitedStatessolelytomajorUSinstitutionalinvestorsasdefinedinRule15a-6undertheUSSecuritiesExchangeActof1934asamendedandmaynotbefurnishedtoanyotherpersonintheUnitedStatesEachmajorUSinstitutionalinvestorthatreceivesacopyofthisreportbyitsacceptancehereofrepresentsandagreesthatitshallnotdistributeorprovidethisreporttoanyotherpersonAnyUSrecipientofthisreportwishingtoeffectanytransactiontobuyorsellsecuritiesbasedontheinformationprovidedinthisreportshoulddosoonlythroughaUS-registeredbroker-dealerForrecipientsofthisdocumentinSingaporeThisreportisdistributedinSingaporebyCMBISingaporePteLimitedCMBISGCompanyRegnNo201731928DanExemptFinancialAdviserasdefinedintheFinancialAdvisersActCap110ofSingaporeandregulatedbytheMonetaryAuthorityofSingaporeCMBISGmaydistributereportsproducedbyitsrespectiveforeignentitiesaffiliatesorotherforeignresearchhousespursuanttoanarrangementunderRegulation32CoftheFinancialAdvisersRegulationsWherethereportisdistributedinSingaporetoapersonwhoisnotanAccreditedInvestorExpertInvestororanInstitutionalInvestorasdefinedintheSecuritiesandFuturesActCap289ofSingaporeCMBISGacceptslegalresponsibilityforthecontentsofthereporttosuchpersonsonlytotheextentrequiredbylawSingaporerecipientsshouldcontactCMBISGat6563504400formattersarisingfromorinconnectionwiththereportPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE7