20201019-招银国际-阿里巴巴-SW-09988.HK-Expecting_solid_2QFY21E_4页_769kb

Alibaba (9988 HK) Company Update Summary

Core Content

CMB International Securities has issued an updated equity research report on Alibaba Group (9988 HK), highlighting its expected performance in the second quarter of fiscal year 2021 (2QFY21E) and its long-term growth prospects. The report maintains a BUY rating with a target price of HK$345, up from the previous target of HK$325.

Key Financial Highlights

• Revenue Growth: Expected to grow by +29% YoY in 2QFY21E, slightly below the consensus by 2%.
• Non-GAAP Net Profit Growth: Expected to grow by +17% YoY.
• Segment Growth:
  • E-commerce: +29% YoY
  • Cloud: +56% YoY
  • Digital Media and Entertainment (DME): +7% YoY
• Adj. EBITA Margin: Forecasted at 26%, with:
  • E-commerce at +35%
  • Cloud at -3%
  • DME at -30%
• Core Commerce: Expected to grow +29% YoY, with China e-commerce revenue at +20% YoY in 2QFY21E.
• Cloud Breakeven: Anticipated to achieve quarterly breakeven in the second half of FY21E, driven by increased VAS (value-added services) and synergies with local services and Alipay.

Valuation and Earnings Revisions

• Valuation: The current valuation at 26.9x FY22E P/E is considered not demanding.
• Earnings Revisions: The report slightly raised earnings forecasts for FY21E/FY22E/FY23E by 0.4%/1%/1%, reflecting better margins from new business.
• Target Price (SOTP-based): HK$345, based on a 31x FY22E P/E multiple.

Financial Summary

Shareholding and Performance

• Shareholding Structure:
  • SoftBank: 24.9%
  • Altaba Inc: 14.8%
  • Jack Ma: 4.8%
• Stock Performance:
  • 1-month: +6.5% (Absolute) / +9.0% (Relative)
  • 3-months: +17.0% (Absolute) / +23.4% (Relative)
  • 6-months: +43.9% (Absolute) / +43.8% (Relative)

Key Catalysts

• Upcoming "11.11" shopping event, with expected strengthened performance from livestreaming and Taobao deals.
• Ant Group's listing, which is a significant catalyst for Alibaba.
• Cloud breakeven in 2HFY21E, with more synergies expected between cloud and local services.

Strategic Outlook

• E-commerce: Strong growth and profitability expected, with a focus on livestreaming initiatives and Taobao deals.
• Cloud Computing: Expected to grow significantly, with the potential to reach breakeven in the second half of FY21E.
• DME: Expected to grow at +7% YoY, but with a -30% EBITA margin.
• Long-term Growth: The report reiterates confidence in Alibaba's secular growth, supported by structural opportunities in e-commerce, cloud, and digital media.

Investment Recommendation

• CMBIS Rating: BUY for Alibaba, with a target price of HK$345.
• Potential Return: Over 15% over the next 12 months.

Disclaimer and Risk Information

• The report is prepared for CMBIS clients and not for public distribution.
• Risks: Inherent in any securities transaction, and the report does not provide individually tailored advice.
• Conflicts of Interest: CMBIS may have investment banking relationships with the companies mentioned, which could affect the report's objectivity.
• No Liability: CMBIS is not liable for any loss, damage, or expense resulting from reliance on the report.

Analyst Certification

• The research analyst certifies that the views expressed reflect personal opinions and are not influenced by compensation or other factors.
• The analyst confirms no trading activity within 30 days prior to the report's issue and no trading activity within 3 business days after the report's issue.

Conclusion

Alibaba is expected to deliver solid results in 2QFY21E, with a revenue growth of 29% YoY and non-GAAP net profit growth of 17% YoY. The report highlights core commerce strength, cloud growth, and upcoming catalysts such as the "11.11" event and Ant's listing. With a revised target price of HK$345, the report maintains a BUY rating, emphasizing Alibaba's long-term growth potential and value proposition.