20221118-招银国际-Earnings_back_on_growth_track_8页_1mb

Alibaba (BABA US) 2QFY23 Earnings Summary

Core Content

Alibaba Group Holding (Alibaba) reported its 2QFY23 results, showing total revenue of RMB207.2bn, a 3% YoY increase, slightly below both the analyst's and Bloomberg's consensus estimates. Non-GAAP net income attributable to ordinary shareholders rose by 13% YoY to RMB34.3bn, exceeding forecasts. The company's strategic focus on scale and efficiency is expected to support steady non-GAAP net profit growth for the remainder of FY23.

The report also outlines the company's updated forecasts and valuations, lowering FY23-25E revenue by 2% each due to macroeconomic headwinds, but raising non-GAAP net income forecasts by 2-7% due to improved operating efficiency. The SOTP-based target price was increased to US$158.70 per ADS, translating into a 18.0x FY24E PE ratio, and the analyst maintains a "BUY" rating.

Main Points

• Revenue Performance:
  • 2QFY23 revenue was RMB207.2bn, up 3% YoY, slightly below estimates.
  • Revenue growth for FY23E is forecasted at 3.4%, FY24E at 12.0%, and FY25E at 9.7%.
• Non-GAAP Net Income:
  • Increased by 13% YoY to RMB34.3bn.
  • Forecasted to grow by 2-7% for FY23-25E due to improved operating efficiency.
• Segment Performance:
  • Customer Management (CMR): Revenue declined 6.5% YoY to RMB66.5bn, mainly due to lower GMV on Taobao and Tmall and soft advertising demand. A 5.7% YoY decline is expected for 3QFY23E, but a recovery in 2023 is anticipated.
  • Cloud Computing: Revenue grew 3.7% YoY to RMB20.8bn, with non-internet industries contributing 28% YoY and 58% of total cloud revenue. The segment's adjusted EBITA margin improved to 2.1%.
  • International Commerce: Revenue rose 4% YoY to RMB15.7bn, with retail and wholesale growing by 3.5% and 6.2% respectively. Adjusted EBITA margin improved to -6.1%.
  • Cainiao Logistics: Revenue surged 36% YoY to RMB13.4bn, driven by domestic consumer logistics and international fulfillment services. Adjusted EBITA turned positive at RMB125mn with a 0.9% margin.
• Share Buyback Plan:
  • Alibaba repurchased approximately 24.3mn ADSs for US$2.1bn in 2QFY23.
  • Directors approved an additional US$15bn repurchase program, extending it through March 2025.
• Forecast and Valuation Revisions:
  • Revenue forecasts for FY23-25E were lowered by 2% each.
  • Non-GAAP net income forecasts were raised by 2-7%.
  • SOTP-based target price is US$158.70 per ADS, reflecting 18.0x FY24E PE.
• Valuation Components:
  • Core Commerce: US$106.9 per ADS based on DCF valuation (WACC 11.7%, terminal growth 2%).
  • Cloud: US$25.5 per ADS based on 6.0x PS multiple on FY23E revenue.
  • Cainiao: US$6.5 per ADS based on 63% shareholding and recent financing.
  • Local Consumer Services: US$5.4 per ADS based on 2.0x PS on FY23E revenue.
  • Strategic Investments: US$14.4 per ADS with a 30% holding discount.

Key Information

• Target Price: US$158.70 per ADS (up from US$154.50).
• Current Price: US$79.30.
• Market Cap: US$216,179.6mn.
• Shareholding Structure: SoftBank holds 23.9% of shares.
• Share Performance:
  • 1-month: +8.6% (Absolute), -1.3% (Relative).
  • 3-months: -14.4% (Absolute), -1.3% (Relative).
  • 6-months: -8.3% (Absolute), -5.8% (Relative).
• Valuation Metrics:
  • P/E: 12.4x (FY24E).
  • ROE: 10.2% (FY24E).
• Financial Highlights:
  • Operating profit in 2QFY23 was RMB25.1bn.
  • Adjusted net profit was RMB34.3bn.
  • Net cash from operations in 2QFY23 was RMB125.6bn.
• Analyst Certification:
  • The analyst certifies that all views reflect personal opinions and that no compensation is directly or indirectly related to the report.
  • No trading activity by the analyst or associates in the past 30 days or within 3 days of report release.

Conclusion

Despite macroeconomic headwinds affecting China commerce revenue, Alibaba's focus on cost control and operating efficiency has led to a stronger-than-expected non-GAAP net income growth. The company's strategic moves in logistics and cloud computing are showing positive signs, with Cainiao's EBITA turning positive and cloud revenue from non-internet industries growing significantly. The updated forecasts and valuations suggest a cautious optimism, with the target price reflecting confidence in the company's long-term growth potential. The "BUY" rating remains in place, indicating a potential return of over 15% over the next 12 months.