20230112-招银国际-Looking_beyond_short-term_pandemic_impact_6页_1mb

Alibaba (BABA US) Summary

Core Content and Outlook

Alibaba Group (BABA) is expected to recover from the short-term impact of the pandemic in 1Q23, with its China retail marketplace GMV growth likely to rebound as overall consumption recovers and economic stimulus policies take effect. The company's strategic initiatives in cost control and operating efficiency are showing positive results, which could support steady earnings growth in 2023.

Despite a YoY decline in customer management revenue (CMR) for 3QFY23, estimated at -9.4%, the company is expected to see a reacceleration in revenue growth for the international commerce segment, with a forecast of 7% YoY growth in 3QFY23. This is attributed to easing factors such as VAT impact on Ali Express in Europe, foreign exchange challenges on Trendyol, and reduced competition in Southeast Asia.

For the full year 3QFY23, Alibaba's total revenue is forecasted to grow by 1% YoY to RMB244.8 billion. The cloud business is expected to continue showing strong performance, with revenue growth of 6% YoY to RMB20.8 billion. The long-term development of the cloud business is viewed positively due to its technological capabilities and potential for faster recovery when the macroeconomic environment improves.

Key Financial Forecasts

Valuation and Target Price

• Target Price: US$156.00 per ADS (a $2.2% reduction from the previous target price of US$158.70).
• Valuation Methodology (SOTP):
  • Core Commerce (ex-cloud, local consumer services, and Cainiao): US$104.1 per ADS based on DCF valuation (WACC of 11.7%, terminal growth of 2%).
  • Cloud Business: US$25.4 per ADS based on a 6.0x PS multiple on FY23E revenue.
  • Cainiao: US$6.5 per ADS based on the most recent financing transaction and 63% shareholding.
  • Local Consumer Services: US$5.2 per ADS based on a 2.0x PS on FY23 revenue.
  • Strategic Investment: US$14.9 per ADS with a 30% holding discount.

The target price translates into a 17.9x FY24E PE (non-GAAP; March year-end).

Business Segment Analysis

• International Commerce: Expected to see a 7% YoY revenue growth in 3QFY23, driven by easing of external challenges.
• Cloud Business: Maintains a competitive edge in technology and is expected to benefit from macroeconomic recovery.
• Local Consumer Services: Likely to see slower growth in 3QFY23 compared to 2QFY23 (from 21% to 10%), due to the impact of aggressive subsidies.
• Core Commerce: Expected to show recovery in GMV, with CMR decline likely to be offset by cost control and improved efficiency.

Shareholding and Market Data

• Shareholding Structure: SoftBank holds 23.9% of shares.
• Stock Data:
  • Market Cap: US$302,133.5 million.
  • 52-Week High/Low: US$137.41/US$63.15.
  • Total Issued Shares: 2,726.1 million.

Share Performance

Valuation Comparison

• Core Business (DCF): US$104.1 per ADS.
• Cloud Business (PS multiple): US$25.4 per ADS (6.0x FY23E revenue).
• Local Consumer Services (PS multiple): US$5.2 per ADS (2.0x FY23 revenue).
• Cainiao: US$6.5 per ADS.
• Strategic Investments: US$14.9 per ADS.

Analyst Ratings and Recommendations

• CMBIGM Rating: BUY
• Reasoning: Based on the potential for return over the next 12 months, the company is expected to outperform the market benchmark.

Analyst Certification and Disclosures

• The analyst certifies that the views expressed in the report accurately reflect their personal views and that there is no conflict of interest.
• The report is not an offer or solicitation to buy or sell any security and is not tailored to individual investors.
• CMBIGM is not a registered broker-dealer in the U.S., and the report is intended for distribution to major U.S. institutional investors only.

Legal and Regulatory Notes

• The report is subject to various legal restrictions depending on the recipient's location (UK, U.S., Singapore).
• CMBIGM is a regulated entity in Singapore and provides information for clients only.