20250410-招银国际-Positive_profitability_growth_of_core_ecommerce_business_likely_to_sustain_7页_952kb

Alibaba (BABA US) Summary

Core Content

Alibaba Group is expected to deliver in-line revenue and adjusted EBITA growth in 4QFY25, driven by its core domestic e-commerce business (Taobao and Tmall Group) and the acceleration of its cloud business. The report highlights the following key areas:

• Core E-commerce Business (T&T Group): The T&T Group is anticipated to maintain a solid customer management revenue (CMR) growth of 10% YoY, supported by healthy GMV growth and an increased monetization rate. The profitability is expected to improve, with a 2% YoY adjusted EBITA growth, translating into a 13.7% adjusted EBITA margin in 4QFY25.

• Cloud Business: The Cloud Intelligence Group is forecasted to see an 18% YoY revenue growth in 4QFY25, with continued strong public cloud performance and incremental AI cloud revenue.

• AIDC (Alibaba Investment in Digital Commerce): AIDC is on track to achieve profitability in the first quarter of FY26, with a 26% YoY revenue growth in 4QFY25. The business is expected to benefit from a diversified revenue base and the potential for AI-driven consumption stimulus policies.

• Non-Core Businesses: These are projected to achieve profitability within 1-2 years, with a notable reduction in losses in 4QFY25.

• Shareholder Returns: Alibaba has repurchased 1.197bn ordinary shares (150mn ADS) for US$11.9bn in FY25, resulting in a 5.1% YoY reduction in share base. The company is expected to announce its FY25 annual dividend in May.

Key Financial Forecasts

Valuation and Target Price

• Target Price: US$157.00 per ADS (previously US$157.70), representing a 16.9x FY25E and 14.6x FY26E non-GAAP PE.
• SOTP Breakdown:
  1. Taobao and Tmall Group: US$80.8 per ADS
  2. AIDC: US$11.6 per ADS
  3. Local Services Group: US$6.0 per ADS
  4. Cainiao: US$2.7 per ADS
  5. Cloud Intelligence Group: US$33.1 per ADS
  6. Digital Media and Entertainment Group: US$0.9 per ADS
  7. All Others: US$11.4 per ADS
  8. Strategic Investments: US$10.6 per ADS

Investment Outlook

• Ratings: BUY (Maintain)
• Current Price: US$104.78
• Up/Downside: 49.8%

Risk Factors

• Investments for business growth may have a more severe impact on margins than expected.
• Consumption recovery may take longer than anticipated.

Shareholding and Stock Performance

• Shareholding Structure:

  • Blackrock: 5.0%
  • Softbank: 4.9%

• Share Performance:

  Period	Absolute (%)	Relative (%)
  1-mth	-20.9	-19.4
  3-mth	30.1	45.6
  6-mth	-4.1	2.4

• 12-Month Price Performance: Image provided (source: FactSet)

Financial Summary

• Revenue: Expected to grow steadily from FY23A to FY27E.
• Net Profit: Expected to increase from RMB61,959mn in FY23A to RMB178,295mn in FY27E.
• Adjusted Net Profit: Expected to rise from RMB143,515mn in FY23A to RMB205,295mn in FY27E.
• Operating Expenses: Projected to increase in FY25E, but with a focus on more efficient sales and marketing spend.
• Cash Flow: Positive net cash from operations is expected in FY25E, with net cash from investing and financing showing a mix of outflows and inflows.

Analyst Certification and Ratings

• The analyst certifies that the views expressed reflect personal opinions and not influenced by compensation.
• CMBIGM Ratings:
  • BUY: Potential return of over 15% over next 12 months.
  • HOLD: Potential return of +15% to -10%.
  • SELL: Potential loss of over 10%.
  • OUTPERFORM: Industry is expected to outperform the relevant broad market benchmark.
  • MARKET-PERFORM: Industry is expected to perform in-line with the relevant broad market benchmark.
  • UNDERPERFORM: Industry is expected to underperform the relevant broad market benchmark.

Important Disclosures

• The report contains forward-looking statements and is not a recommendation for investment.
• The information is based on publicly available data and may be subject to change.
• CMBIGM is not a registered broker-dealer in the U.S. and may have conflicts of interest.
• The report is intended for specific investors and should not be distributed to others without consent.