20180921-招银国际-Key_takeaways_from_2018_Investor_Day_9页_1mb

Alibaba (BABA US) 2018 Investor Day Summary

Core Content

Alibaba Group's 2018 Investor Day provided insights into its financial outlook, strategic direction, and long-term vision. The report from CMB International highlights the company's continued focus on core commerce, cloud computing, and digital media, along with its plans for future growth through ecosystem synergies and strategic investments.

Key Takeaways

• FY19E Revenue Guidance Unchanged:

  • Revenue is expected to grow by +60% YoY, with organic growth at +50% YoY.
  • Despite macroeconomic challenges, the firm maintains confidence in long-term growth driven by core commerce, New Retail, and ecosystem synergies.
  • The BUY rating is maintained with a target price of US$226.5, representing +37.1% upside from the current price of US$165.2.

• Chairman's Retirement:

  • Jack Ma discussed his retirement plan, emphasizing a 10-year preparation to ensure smooth succession.
  • Daniel Zhang, the current CEO, is seen as a competent leader with 11 years of experience at Alibaba.
  • A one-year transition period and the Alibaba Partnership are expected to maintain corporate governance and stability.
  • The trade war is anticipated to have short-term negative impacts on both China and the USA, but may benefit Alibaba in the long run by promoting a shift towards an upper-grade economy.

• Investing for Future Growth:

  • Alibaba is increasing investments in local services, New Retail, globalization, and technology.
  • These investments are expected to weigh on near-term margins but unlock ecosystem synergies over time.
  • Initial fruits from synergies with investees like Youku have already been realized.

Strategic Initiatives

• Cloud Computing as a Cornerstone:

  • The cloud business is viewed as a multi-business engine with robust consumer growth and category expansion.
  • Alibaba Cloud is expected to attract more customers from a broader spectrum of industries.
  • The company has a 45.5% market share in China's IaaS market and serves 40% of China's Top 500 companies.

• Digital Economy and New Retail:

  • Alibaba's digital economy is a multi-business combination with growth driven by consumer growth and data-powered innovations.
  • The New Retail strategy aims to shift from B2C to C2B model, leveraging demand-driven supply chains and data insights.
  • The Taobao interface upgrade and recommendation improvements are expected to enhance monetization potential in the long term.

• User Base and Growth Drivers:

  • 70% of new users come from less developed areas, and ~27% / 41% are aged 19–35 / 36–50.
  • 88VIP membership is expected to increase user stickiness and cross-selling opportunities.
  • Diversified consumer base and recommendation algorithms are key to future growth.

Financial Highlights

Shareholding and Market Performance

• Market Cap (US$mn): 428,903

• Avg. 3mths Turnover (US$mn): 3,958.6

• 52W High/Low (US$): 212/153

• Total Issued Shares (mn): 2,571.9

• Shareholding Structure:

  • SoftBank: 28.8%
  • Altaba Inc: 14.8%
  • Jack Ma: 5.3%

• Share Performance:

  • 1-mth: -7.7%
  • 3-mth: -19.6%
  • 6-mth: -16.7%

SOTP Valuation

Key Ratios

Analyst Certification and Ratings

• Analyst Certification:

  • The analyst certifies that the views expressed accurately reflect their personal views.
  • No compensation is directly or indirectly related to the specific views in the report.

• CMBIS Ratings:

  • BUY: Stock with potential return of over 15% over the next 12 months.
  • HOLD: Stock with potential return of +15% to -10% over the next 12 months.
  • SELL: Stock with potential loss of over 10% over the next 12 months.
  • NOT RATED: Stock not rated by CMBIS.

Important Disclosures

• There are risks involved in transacting in any securities.
• The information in this report is not suitable for all investors.
• No individually tailored investment advice is provided.
• Past performance does not guarantee future performance.
• Actual events may differ materially from those in the report.
• Investors are advised to consult with a professional financial advisor for their own investment decisions.
• CMBIS is not liable for any loss or damage incurred from relying on the report.
• The report is intended solely for clients of CMBIS and its affiliates.
• The report is not an offer or solicitation to buy or sell any securities.
• The information is based on publicly available data and subject to change.
• Other publications may reflect different assumptions and viewpoints.
• CMBIS may have positions or engage in transactions inconsistent with the report's recommendations.