20220527-招银国际-Moderate_recovery_in_sight_with_cost_efficiency_5页_857kb

Alibaba (BABA US) Company Update Summary

Core Content

CMB International Global Markets has issued an update on Alibaba Group (BABA US), highlighting its performance in the fourth quarter of fiscal year 2022 (4QFY22) and providing forecasts for the next few years. The report suggests a moderate recovery is in sight, driven by cost efficiency and improving market conditions.

Main Points

• 4QFY22 Performance:

  • Revenue increased by +9% YoY, slightly above the consensus and the firm's own estimate.
  • Non-GAAP net profit declined by -24% YoY, but still +7% above consensus.
  • Adj. EBITA margin reached 8%, +4ppts above the previous year, with China commerce margin at +23% and Cloud margin at +1%.
  • China commerce revenue grew by +8% YoY, +5% above estimate, while local services revenue was stable at 0% YoY.
  • GMV declined by low single-digit YoY, better than the market's expectation, with CMR showing a low-single-digit decline in 4QFY22, improving from a -2% decline in 3QFY22.

• Outlook:

  • CMR is expected to decline by -8% YoY in 1QFY23E but to achieve positive growth in 2HFY23E.
  • Cloud revenue growth slowed to +12% YoY, 6% below estimate, primarily due to reduced demand in certain sectors like online education and entertainment.
  • The report believes that the 2Q22E epidemic impact has been well priced in, and suggests that a recovery may occur in the second half of FY22E.
  • The firm has trimmed its earnings forecast for FY22-24E by 6–11%.

• Valuation and Target Price:

  • The new target price (TP) is US$150.6, based on a SOTP valuation.
  • The current valuation is 13x FY23E P/E, which is considered attractive given the expected recovery and margin improvements.
  • The previous TP was US$153.2, and the current price is US$94.5, with a +59.4% upside to the new TP.

Key Information

• Earnings Summary:

  • Revenue for FY21A was RMB 717,289 million, with a YoY growth of 40.7%.
  • Adj. net profit for FY22A was RMB 146,892 million, with a YoY decline of 17.9%.
  • Adj. net profit for FY23E is forecasted at RMB 132,375 million, and for FY24E at RMB 151,807 million.
  • Adj. EPS for FY23E is RMB 47.5, with a YoY decline of 9.9%.

• Share Performance:

  • The stock has seen a -4.6% performance over the last month, +8.7% relative to the market.
  • Over the last three months, it declined -24.3%, with a -9.4% relative performance.
  • Over six months, it declined -39.6%, with a -15.0% relative performance.

• Market Cap:

  • The current market cap is US$223,569 million, with an average 3-month trading value of US$3,350.54 million.

• Shareholding Structure:

  • Major shareholders include Goldman Sachs (0.8%), Primecap Management (0.6%), and Govt Pension Inv Fund Jap (0.6%).

• Ratings and Recommendations:

  • The firm maintains a BUY rating, indicating a potential return of over 15% over the next 12 months.
  • The target price is US$150.6, which is based on a 13x FY23E P/E valuation.

Financial Highlights

• Revenue Growth:

  • Expected to slow to +7.1% YoY in FY23E and +10.9% YoY in FY24E.

• Adj. Net Profit:

  • Expected to grow +14.7% YoY in FY24E and +18.3% YoY in FY25E.

• Margins:

  • Adj. net margin is forecasted to decline slightly to 14.5% in FY23E.
  • Operating margin is expected to rise to 10.5% in FY23E and 12.2% in FY24E.

• Cash Flow and Balance Sheet:

  • The company is in net cash position for FY22A and FY23E.
  • Cash at the end of FY22A is RMB 339,643 million, and is forecasted to grow to RMB 536,544 million by FY25E.

Key Ratios

• ROE:

  • FY21A: 18.7%, FY22A: 19.1%, FY23E: 14.3%, FY24E: 11.4%, FY25E: 11.5%.

• P/E Ratio:

  • FY21A: 9.7x, FY22A: 11.3x, FY23E: 13.3x, FY24E: 11.7x, FY25E: 10.0x.

• P/B Ratio:

  • FY21A: 2.4x, FY22A: 2.0x, FY23E: 1.9x, FY24E: 1.7x, FY25E: 1.5x.

Analyst Certification and Disclosures

• The research analyst certifies that the views expressed accurately reflect their personal views and that there are no conflicts of interest related to the report.
• CMBIGM has an investment banking relationship with the companies mentioned in the report.
• The report is not a solicitation to buy or sell any securities and is intended for specific recipients.
• The firm does not provide individually tailored investment advice and recommends independent evaluation and consultation with a professional financial advisor.

Conclusion

Alibaba Group has shown better-than-feared results in 4QFY22, with moderate recovery expected in the coming quarters. The firm's BUY recommendation is based on positive growth outlook, improving margins, and attractive valuation. The report also highlights the ongoing challenges in the cloud segment and the narrowing losses from certain business lines. Investors are advised to monitor the recovery and consider the target price as a potential benchmark.