20220110-招银国际-Challenges_yet_over_5页_909kb

Alibaba (BABA US) Company Update Summary

Core Content

This document provides a comprehensive update on Alibaba Group (BABA US) from CMB International Securities, focusing on its financial performance, earnings forecasts, and investment outlook for the upcoming quarters and years.

Main Points

Financial Performance in 3QFY22E

• Revenue: Expected to grow by 13% YoY to RMB 248,727 million.
• Net Profit: Expected to decline by 37% YoY to RMB 29,506 million.
• Adj. Net Profit: Expected to be RMB 38,064 million, a -35.7% YoY decline.
• Adj. EPS: Expected to be RMB 13.78, a -37.4% YoY decline.
• Adj. EBITA Margin: Estimated at 18.7%, reflecting a -9ppts YoY drop and +5ppts QoQ increase.
• Core Commerce Revenue: Expected to grow 12% YoY.
• Cloud Revenue: Expected to grow 25% YoY, down from 33% YoY in the previous quarter.
• DME Revenue: Expected to grow 5% YoY.
• Cloud Margin: Expected to range at low single digits.
• Core Commerce Margin: Expected to be +24% YoY.
• Cloud Margin: Expected to be +3% YoY.
• DME Margin: Expected to be -11% YoY.

Challenges

• Soft Consumption: Continues to dampen the company's performance.
• Epidemic Resurgence: Affects consumer behavior and business operations.
• Regulation Tightening: Creates additional compliance and operational challenges.
• Macroeconomic Conditions: Weaken enterprise budgets and slow down some verticals, especially in education and gaming.
• International Business Headwinds: Includes EU tariffs and Lira volatility.
• Travel Restrictions: Impact core commerce and livestreaming KOLs.

Earnings Forecast Adjustment

• Trimmed FY22-24E earnings forecast by 1–2%.
• Target Price (TP) reduced to US$181.6 from US$213.0, with a -26.5% discount to the previous TP.
• P/E Ratio: Estimated at 16.2x (FY22E) and 14.3x (FY23E), below the consensus.

Investment Recommendation

• Maintain BUY rating, with a target price of US$181.6.
• Suggest waiting for clearer signals of macroeconomic recovery before making investment decisions.

Key Information

Revenue Trends

Adj. Net Profit Trends

Earnings Forecast vs. Consensus

Valuation Metrics

• SOTP Valuation: Estimated at US$499 billion.
• Target Price (TP): US$181.6 (23x/20x FY22/23E P/E).
• Current Price: US$129.8.
• TP vs. Current Price: +39.7% upside.
• P/B Ratio: Estimated at 1.9x (FY22E), declining to 1.5x (FY24E).
• ROE: Expected to be 13.6% in FY24E.

Shareholding and Performance

• Market Cap: US$343.28 billion.

• Average 3-Month Turnover: US$3,351.72 million.

• Shareholding Structure:

  • Goldman Sachs: 1.8%
  • T Rowe Price Group: 1.0%
  • Norges Bank: 0.9%

• Share Performance:

  • 1-Month: +2.5% (Absolute) / +3.4% (Relative)
  • 3-Month: -12.1% (Absolute) / -15.5% (Relative)
  • 6-Month: -40.2% (Absolute) / -41.8% (Relative)

Conclusion

CMB International Securities remains cautiously optimistic about Alibaba's long-term prospects but acknowledges ongoing challenges. The company's performance is expected to be impacted by macroeconomic conditions, regulatory pressures, and consumer behavior. While the cloud business is still a growth driver, it is projected to decelerate due to shrinking enterprise budgets and vertical slowdowns. The analyst has adjusted the earnings forecast and target price in light of these headwinds, recommending a BUY rating with a wait-and-see approach until clearer macroeconomic signals emerge.