Alibaba (BABA US) Company Update Summary
Core Content
This report provides an equity research update on Alibaba Group (BABA US) from CMB International Global Markets, highlighting the company's financial performance, market outlook, and investment recommendations.
Main Points
Financial Performance in 1QFY23E
- Revenue: Expected to decline by -1% YoY.
- Non-GAAP Net Profit: Estimated at -38% YoY.
- Adj. EBITA Margin: At 13%, a decline of -7ppts YoY but an increase of +5ppts QoQ.
- China Commerce Revenue: -4% YoY, with CMR at -11% YoY, driven by epidemic impact on commissions despite resilient advertising.
- 618 GMV: Achieved positive growth, narrowing the gap with JD.com, better than buy-side expectations.
- GMV in Apr & May: Declined by low-teens YoY.
- Cloud Revenue: +10% YoY, mainly due to macroeconomic pressure and strategic adjustments.
- Local Life Revenue: +5% YoY, with improving margins.
Market Outlook
- Moderate Recovery: Expected in 2HFY23E with positive growth.
- Economic Impact: The company is expected to benefit from both lockdowns and regulatory relaxations.
- Segment EBITA Margin: Expected to be at 28.5% in the Jun quarter, with continued narrowing loss from Taocaicai and Taobao Deals.
Investment Recommendation
- Maintain BUY: The company's valuation is considered attractive, with a target price (TP) of US$151.0 (21x FY23E P/E).
- Valuation: The SOTP-based TP is US$151.0, indicating a reasonable valuation relative to future growth and margin outlook.
Key Financial Metrics
| Metric |
FY21A |
FY22A |
FY23E |
FY24E |
FY25E |
| Revenue (RMB mn) |
717,289 |
853,062 |
908,768 |
1,007,429 |
1,129,809 |
| YoY Growth (%) |
40.7 |
18.9 |
6.5 |
10.9 |
12.1 |
| Adj. Net Profit (RMB mn) |
178,954 |
146,892 |
132,263 |
152,056 |
179,697 |
| Adj. EPS (RMB) |
65.2 |
56.2 |
47.4 |
54.0 |
63.2 |
| YoY Growth (%) |
26.6 |
-17.9 |
-10.0 |
15.0 |
18.2 |
| P/E (x) |
12.2 |
14.2 |
16.8 |
14.8 |
12.6 |
| P/B (x) |
3.0 |
2.5 |
2.3 |
2.1 |
1.9 |
| ROE (%) |
18.7 |
19.1 |
14.3 |
11.4 |
11.6 |
| Net Gearing (%) |
Net cash |
|
|
|
|
Revenue Breakdown
| Segment |
1QFY21 |
2QFY21 |
3QFY21 |
4QFY21 |
1QFY22 |
2QFY22 |
3QFY22 |
4QFY22 |
4QFY23E |
| China Commerce |
107,985 |
102,043 |
161,328 |
130,391 |
144,029 |
136,120 |
172,226 |
140,330 |
138,480 |
| International Commerce |
10,216 |
11,299 |
13,920 |
13,416 |
15,202 |
15,092 |
16,449 |
14,335 |
16,038 |
| Local Consumer Services |
7,892 |
9,824 |
9,536 |
8,123 |
10,099 |
10,806 |
12,141 |
10,445 |
10,604 |
| Cainiao |
7,713 |
8,226 |
11,360 |
9,959 |
11,601 |
9,846 |
13,078 |
11,582 |
12,181 |
| Cloud |
12,437 |
15,029 |
16,227 |
16,865 |
16,051 |
20,007 |
19,539 |
18,971 |
17,656 |
| DME |
6,994 |
8,066 |
8,079 |
8,047 |
8,073 |
8,081 |
8,113 |
8,005 |
7,831 |
| Innovation Initiatives |
514 |
572 |
634 |
594 |
685 |
738 |
1,034 |
384 |
754 |
Earnings Revision
| Metric |
New (FY23E) |
Old (FY23E) |
Diff (%) |
| Revenue (RMB mn) |
908,768 |
913,552 |
-0.5% |
| Gross Profit (RMB mn) |
283,260 |
284,238 |
-0.3% |
| Operating Profit (RMB mn) |
82,334 |
82,184 |
0.2% |
| Adj. Net Profit (RMB mn) |
132,263 |
132,375 |
-0.1% |
| EPS (RMB) |
47.42 |
47.46 |
-0.1% |
| Gross Margin (%) |
31.2% |
31.1% |
+0.1ppts |
| Operating Margin (%) |
9.1% |
9.0% |
+0.1ppts |
| Adj. Net Margin (%) |
14.6% |
14.5% |
+0.1ppts |
CMBIGM Estimates vs. Consensus
| Metric |
CMBIGM |
Consensus |
Diff (%) |
| Revenue (RMB mn) |
908,768 |
922,356 |
-1.5% |
| Gross Profit (RMB mn) |
283,260 |
323,638 |
-12.5% |
| Operating Profit (RMB mn) |
82,334 |
92,075 |
-10.6% |
| Adj. Net Profit (RMB mn) |
132,263 |
132,090 |
-0.1% |
| EPS (RMB) |
47.42 |
50.23 |
-5.6% |
| Gross Margin (%) |
31.2% |
35.1% |
-3.9ppts |
| Operating Margin (%) |
9.1% |
10.0% |
-0.9ppts |
| Adj. Net Margin (%) |
14.6% |
14.3% |
+0.2ppts |
SOTP Valuation
| Segment |
Valuation (US$bn) |
Per Share (US$) |
Multiple Applied |
Metrics |
| Core Commerce |
285.4 |
103.4 |
EV/EBITA |
28.9 |
| Cloud |
53.2 |
19.3 |
P/S |
4.6 |
| Others |
78.4 |
28.4 |
- |
- |
| Digital Entertainment |
10.0 |
3.6 |
P/S |
2.0 |
| Innovation |
1.0 |
0.4 |
P/S |
3.0 |
| Net (Debt)/Cash |
31.1 |
11.3 |
- |
- |
| Equity Value (US$) |
417 |
151.0 |
- |
- |
Analyst Certification & Disclosures
- The analyst certifies that the views expressed accurately reflect their personal views and that their compensation is not related to the specific views in this report.
- The analyst confirms no trading in the stock covered within 30 days before the report's issue and will not trade within 3 business days after.
- CMBIGM or its affiliates have investment banking relationships with the issuers in this report.
- This report is for informational purposes only and not an offer to buy or sell securities.
- The information is based on publicly available data and is not guaranteed for accuracy or completeness.
- CMBIGM may have conflicts of interest and is not liable for any losses incurred from reliance on this report.
CMBIGM Ratings
- BUY: Potential return of over 15% over the next 12 months.
- HOLD: Potential return of +15% to -10% over the next 12 months.
- SELL: Potential loss of over 10% over the next 12 months.
- NOT RATED: Not rated by CMBIGM.
- OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
- MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
- UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.
Important Disclosures
- This report is for the use of intended recipients only and may not be reproduced, reprinted, sold, redistributed, or published without prior written consent.
- CMBIGM is not a registered broker-dealer in the U.S. and is not subject to U.S. rules on research report preparation and analyst independence.
- The report is intended solely for "major U.S. institutional investors" as defined in Rule 15a-6.
- The information is based on the analyst's analysis and may change without notice.
