We maintained our buy rating and lowered our target price for Hong Kong stocks to HK $168, a potential increase of 23%, and the target price for US stocks to US $172, a potential increase of 23%.
The overall performance was lower than market expectations, and the guidelines for fiscal year 2022 were lowered: BABA's 2QFY22 income increased by 29% year-on-year to 200.7 billion yuan, which was 2.7% lower than market expectation. Without considering the influence of Gao Xin's consolidated statement, revenue increased by 16% compared with the same period last year. Adjusted net profit was 28.5 billion, down 39% from the same period last year, and 14% lower than market expectations. The company downgraded its guidance for fiscal year 2022: revenue fell to 20-23% year-on-year growth (8607-882.3 billion) from 930 billion yuan (30% growth) in May this year.
The growth of customer management revenue has slowed, and Amoy's growth performance is outstanding: as of the current quarter, the global annual active users reached 1.24 billion, an increase of 62 million compared with the previous quarter. Among them, the domestic annual active users are 953 million, and the company aims to exceed 1 billion in the next two quarters; overseas users increased by 20 million to 285 million month-on-month. Affected by macroeconomic and industry competition, the growth rate of customer management revenue slowed to 3% year-on-year in this quarter, and the impact is expected to continue into the second half of the fiscal year. Tate's annual active users increased to 240 million, a month-on-month increase of 49 million, a rapid growth. Nearly half of the daily active users in Taobao are non-Taobao users, which is the main user increment of BABA e-commerce.
Cloud computing continues to make profits, and new business investment puts pressure on the profit side: in this quarter, cloud computing revenue grew 33% to 20 billion yuan compared with the same period last year, with an adjusted EBITA rate of 2%, making profits for four consecutive quarters. In the current quarter, the company's adjusted net profit fell 39% compared with the same period last year, mainly due to increased investment in areas such as Taote and local living services, resulting in an adjusted EBITA rate of 19.4% for core businesses, compared with 35.1% for the same period last year. We expect short-term profits to remain under pressure.
Maintain the buy rating and adjust the target price to HK $168 / US $172: due to the tightening of anti-monopoly and other regulatory policies, the company is facing increased competition in the industry. We have lowered the annual FY22/23 revenue by 4.9% and 9.4% respectively, the target price for Hong Kong stocks to HK $168, and the target price for US stocks to US $172, corresponding to 19x and 14x FY22E/23E price-to-earnings ratios. The company is under short-term pressure but is still bullish on long-term development, with valuations well below the historical average of the past five years (34.8x), attractive valuations and maintaining a "buy" rating.
Investment risk: tighter regulation; investment in new business may put pressure on the profit side; market sentiment is not good.