20170703-招商证券_香港_-China_Internet__Alibaba__s_AliCloud__A_clear_share_leader_in_China,_but_any_threats_from_US_peers__13页_2mb_2mb

Summary of the Industry Report on Alibaba's AliCloud

Core Content

This report provides an in-depth analysis of Alibaba's cloud computing business, specifically AliCloud, and its position in the Chinese market compared to global and US-based competitors. It also outlines the broader context of the global and Chinese internet and cloud market, emphasizing growth trends and strategic advantages.

Main Points

• AliCloud's Leadership in China:

  • AliCloud is the clear market leader in China with a strong presence and significant market share.
  • It maintains a leading position in terms of scale and pricing, and is expected to continue its dominance due to its first-mover advantage, continuous investment, and price cuts.
  • The company has a 40.7% market share in the Chinese IaaS cloud market according to IDC in 2016.

• Strengths and Weaknesses:

  • Strengths: Scale, product marketing, online sales capability, and product offering.
  • Weaknesses: Lags behind US peers in product integration, functional depth, and user documentation.
  • Comparison with US Peers: US cloud providers such as Azure and AWS are better in technology and product integration, but AliCloud has a significant advantage in the Chinese market due to its local presence and cost-effectiveness.

• Strategic Focus:

  • AliCloud is expanding into emerging markets with new regional data centers.
  • It is focusing on traditional enterprises, governments, and SOEs, offering value-added vertical applications such as SaaS and data analytics.
  • The company is also providing consulting services in data analytics, which have received positive feedback.

• Growth Opportunities:

  • AliCloud is expected to grow rapidly in the Chinese IaaS cloud market, which is projected to expand by 123% YoY to $7.8 billion in 2018.
  • The company is enhancing its product depth and improving its EBITA margin, which improved from -7% in FY16 to -8% in FY17.

• Ecosystem Integration:

  • AliCloud is a core component of Alibaba's ecosystem, supporting various business lines including e-commerce, payment, logistics, and media entertainment.
  • It leverages Alibaba's data intelligence and AI capabilities to provide advanced services and insights to its clients.

• Global Market Position:

  • Globally, AliCloud has a smaller market share compared to AWS and Microsoft Azure.
  • However, it is expanding its global footprint by adding new regions in 2017, including India, Indonesia, and Malaysia.

• Market Trends:

  • The global public cloud market is expected to grow at a CAGR of 16.3% from 2016 to 2020.
  • China's public cloud market is growing faster, with a CAGR of 17.5%, and IaaS is the fastest-growing segment.
  • By 2020, China's public cloud market is expected to reach $21 billion, with AliCloud's share growing as the market expands.

Key Information

• Market Share: AliCloud holds 40.7% of the Chinese IaaS cloud market in 2016.
• Growth Projections:
  • Chinese IaaS cloud market is expected to grow by 123% YoY to $7.8 billion in 2018.
  • Global public cloud market is projected to grow at 16.3% CAGR from 2016 to 2020.
• Product Portfolio: AliCloud offers a comprehensive range of cloud services, including elastic computing (ECS), database, storage, CDN, security, and big data analytics.
• Pricing Strategy: AliCloud has a price advantage due to economies of scale and is expected to continue its aggressive pricing strategy.
• Strategic Expansion:
  • Plans to expand to new regions in 2017, including India, Indonesia, and Malaysia.
  • Focus on emerging markets with price discounts (10-15% vs. global leaders in IaaS).
• Financials:
  • AliCloud's EBITA margin improved from -76% in 1Q16 to -8% in 4Q17.
  • Revenue growth is expected to come from both existing and new clients, particularly in traditional industries.

Conclusion

The report concludes that AliCloud is expected to maintain its leadership in the Chinese cloud market, with limited immediate threats from US peers. It emphasizes the company's strengths in scale, marketing, and product offering, while acknowledging areas for improvement in product integration and functional depth. The report also highlights AliCloud's role in Alibaba's ecosystem and its strategic focus on expanding into emerging markets and enhancing its services through data intelligence and AI.