UBS: Positive on Baidu-SW (09888) AI business maintaining strong growth, maintaining a "buy" rating.

UBS Group AG released a research report stating that Baidu Inc Sponsored ADR Class A-SW (09888) announced its fourth quarter and annual business results as of the end of last year, with the fourth quarter performance exceeding expectations. To better demonstrate its strategic direction to investors, the group has improved financial disclosure since the third quarter and continued to share key indicators driven by its AI business in the fourth quarter, with related revenue reaching 11.3 billion yuan, a year-on-year increase of 48%, accounting for 43% of Baidu Inc Sponsored ADR Class A's total revenue (core business). The target price for Baidu Inc Sponsored ADR Class A (BIDU.US) shares is maintained at $180, with a target price for H shares at 175 Hong Kong dollars, both rated as "buy." Looking ahead to the fiscal year 2026, UBS Group AG stated that with the increasing popularity of AI applications, continued product innovation, and broader usage scenarios, the group's AI business is expected to maintain strong growth, with a further increase in revenue contribution. Despite recent fluctuations in the group's stock price, UBS believes that its valuation framework based on a sum-of-the-parts approach remains stable. Considering future positive factors such as the IPO of its Kunlun chip subsidiary and dividend announcements, UBS finds the current stock price attractive in terms of risk-reward. Based on continued focus on operational efficiency, there has been a slight upward adjustment in the core non-GAAP operating margin.