Alibaba (BABA US) Company Update Summary
Core Content Overview
This report provides an update on Alibaba Group's financial performance and outlook for the fiscal year 2022 (FY22E) and beyond. The analysis is conducted by CMB International Securities, and the findings suggest a cautious approach to the company's growth trajectory amid macroeconomic challenges and regulatory pressures.
Main Points
Financial Performance (2QFY22)
- Revenue: +29% YoY, but 3% below consensus
- Adj. Net Profit: -39% YoY, 14% below consensus
- Core Commerce Revenue: +31% YoY
- Cloud Revenue: +34% YoY
- DME Revenue: 0% YoY
- Adj. EBITA Margin: 14%, down 6 percentage points from the previous quarter
Core Margin (CMR) Growth
- CMR Growth: +3% YoY, below the estimated +7% YoY
- Reasons for Deceleration: Soft consumption due to ongoing COVID-19 cases, macroeconomic moderation, and tightened regulations
- User Growth: Taobao Deals and Taocaicai users performed well, with TD AAC reaching 240 million by September and TCC GMV up 150% QoQ
Earnings Forecast Adjustment
- Trimmed Earnings Forecast: FY22-24E earnings are reduced by 14%–19%
- Target Price (TP): Lowered to US$213.3 (from US$255.4)
- Price Range Expectation: The report suggests the price may range trade over the coming quarters
Investment Strategy
- Focus on Quality Growth: Alibaba is expected to prioritize sustainable growth and take on more social responsibility
- Valuation Methodology: SOTP-based valuation is used, with a revised TP of US$213.3
Key Financial Metrics
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Revenue (RMB mn) |
509,711 |
717,289 |
865,804 |
992,312 |
1,151,646 |
| YoY Growth (%) |
35.3 |
40.7 |
20.7 |
14.6 |
16.1 |
| Adj. Net Profit (RMB mn) |
132,479 |
171,985 |
142,312 |
163,343 |
201,968 |
| Adj. EPS (RMB) |
53.9 |
65.2 |
51.8 |
58.8 |
72.0 |
| YoY Growth (%) |
41.8 |
21.0 |
-20.5 |
13.6 |
22.4 |
| P/E (x) |
17.4 |
14.4 |
18.1 |
15.9 |
13.0 |
| P/B (x) |
2.8 |
2.4 |
2.1 |
1.9 |
1.7 |
| ROE (%) |
16.3 |
16.6 |
12.5 |
12.7 |
13.8 |
Revenue Breakdown
| Segment |
FY22E (RMB mn) |
YoY Growth (%) |
| Core Commerce |
743,667 |
31% |
| Cloud Computing |
81,162 |
34% |
| Digital Media & Entertainment |
34,928 |
0% |
| Innovation Initiatives |
6,046 |
22% |
Earnings Revision
| Metric |
New (FY22E) |
Old (FY22E) |
Diff (%) |
| Revenue |
865,804 |
910,294 |
-4.9% |
| Gross Profit |
316,018 |
353,995 |
-10.7% |
| Operating Profit |
99,904 |
114,604 |
-12.8% |
| Adj. Net Profit |
142,312 |
207,178 |
-31.3% |
| Adj. EPS (RMB) |
51.77 |
57.3 |
-14.4% |
Valuation Summary
| Segment |
Valuation (US$ bn) |
Per Share (US$) |
Multiple Applied |
Metrics |
| Core Commerce |
391.7 |
142.5 |
EV/EBITA 18.0 |
21.8 |
| Cloud |
99.1 |
36.1 |
P/S 10.8 |
12.4 |
| Digital Entertainment |
10.7 |
3.9 |
P/S 2.2 |
5.3 |
| Innovation Initiatives |
2.8 |
1.0 |
P/S 3.8 |
0.9 |
| Net (Debt)/Cash |
29.6 |
10.8 |
- |
- |
| Equity Value (US$) |
586 |
- |
- |
- |
| TP (HK$) |
247.4 |
- |
- |
- |
Analyst Ratings and Recommendations
- CMBIS Rating: BUY
- Potential Return: Over 15% over next 12 months
- Current Price: US$145.0
- TP: US$213.3 (Downside: +47.1%)
Analyst Contact
Disclaimer
- The report is not a recommendation and is for informational purposes only.
- CMBIS does not provide individually tailored investment advice.
- The information is subject to change without notice.
- There are risks involved in trading any securities, and actual events may differ from the report's projections.
- CMBIS may have investment banking relationships with the issuers and may have conflicts of interest.
Key Ratios
| Metric |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Gross Margin (%) |
44.6 |
41.3 |
36.5 |
36.5 |
37.0 |
| PreTax Margin (%) |
32.7 |
23.1 |
21.9 |
22.3 |
22.4 |
| Tax Rate (%) |
-12.3 |
-17.7 |
-23.0 |
-23.0 |
-23.0 |
| Adj. Net Margin (%) |
28.2 |
25.0 |
17.4 |
17.3 |
18.2 |
| ROE (%) |
16.3 |
16.6 |
12.5 |
12.7 |
13.8 |
| ROA (%) |
10.1 |
10.2 |
7.4 |
7.7 |
8.5 |
Summary of Recommendations
- CMBIS Rating: BUY
- Target Price: US$213.3
- Consensus EPS: 57.3 (FY22E)
- CMBI EPS: 51.8 (FY22E)
- CMBI vs. Consensus Diff: -14.4%
Additional Notes
- The report highlights the need to wait for clearer signals of macroeconomic recovery.
- The company's strategy is shifting towards quality growth and social responsibility.
- The financial data is presented in RMB million and includes key ratios and performance metrics.
