Financial performance: both revenue and profit are lower than expected

FY2022Q2, the company achieved operating income of 200.7 billion yuan, a year-on-year increase of 29%, lower than Bloomberg's consensus forecast of 207.2 billion yuan; Non-GAAP net profit of 28.5 billion yuan, net interest rate of 14.2%, an increase of-39% over the same period last year, lower than Bloomberg's consensus forecast of 33.1 billion yuan. Management cut its FY2022 revenue guidance from 28% to 22% Murray 23%.

E-commerce: the income growth of Taobao and Tmall slowed down, the sales growth of Singles' Day was low FY2022Q2, and the core e-commerce revenue was 171.2 billion yuan, up 31% from the same period last year. Among them, Taobao and Tmall earned 71.7 billion yuan, up 3% from the same period last year. On the profit side, the adjusted EBITA profit margin was 19%, down 28% from the same period last year. We estimate that the growth rate of GMV is further slower than that of the previous quarter, and the growth rate of revenue on e-commerce platform is lower than that of GMV due to profit-making merchants. Tmall's sales on Singles Day were 540.3 billion yuan, an increase of 8.45% over the same period last year, reflecting the impact on its core category after "choosing one from two" was stopped.

Cloud business: revenue growth rebounded for the first time since the loss of major customers. Aliyun's business revenue in this quarter was 20 billion yuan, up 34% from the same period last year, and 5% from the previous quarter.

On the profit side, the adjusted EBITA profit margin of the cloud business remained at 2.0% in the current quarter, making a profit for the third consecutive quarter. According to IDC, 2021H1 Aliyun's market share is 37.9%, down 3.5% from the same period last year, but still ranks first in the country.

Investment advice: considering the economic slowdown and the impact on the core category, we are optimistic about the growth space of Aliyun business, but its core e-commerce platform business is currently facing triple pressure from policy regulation, macroeconomic slowdown and impact on the core category. We downgraded its revenue growth forecast. The distribution valuation method is used to value it, and the corresponding valuation range for 2022 is HK $207 to HK $224, which is downgraded by 17% to "overweight" rating.

Risk Tips:

Policy regulation brings about business adjustment; the systemic risk caused by the uncertainty of the global epidemic; the risk of deterioration of the competition pattern in the e-commerce industry, and so on.