From October to November in 2021, the physical network grew by 10% and 5% compared with the same period last year. Taking into account BABA's continued subsidies and support to merchants, we expect the company's CMR to grow by about 1% in the December quarter compared with the same period last year. Investment in innovative businesses such as Taote and Taocai is flat from the previous month, and the core business is expected to be Adjusted EBITA yoy-25%. In the cloud business, we expect cloud computing revenue to grow by about 25% in December, taking into account the impact of head customers and the education and gaming industries, as well as a reduction in the budgets of government and corporate customers. We believe that the decline in the company's share price since the September quarter largely reflects the pessimistic expectations of short-term fundamentals. the future recovery of the consumer industry, the optimization of e-commerce competition and the faster-than-expected growth of the company's cloud computing and innovation business are expected to be the catalysis of the company's stock price upward. we maintain a relatively optimistic attitude towards the company's medium-and long-term digital business service capabilities and maintain the "buy" rating of the company's Hong Kong and US stocks.

Core business: CMR growth slows down, organizational structure changes stimulate development vitality. According to the data of the National Bureau of Statistics, online retail sales of physical goods increased by 10% and 5% from October to November 2021. We expect the company's core e-commerce GMV growth to be close to the market in the December quarter, but considering the increase in subsidies and support from merchants, CMR growth may be slower than GMV growth, and we expect CMR growth in the December quarter to be about 1%. In terms of new business, Dashan said on Investor Day 2021 that Taocai and Taote will continue to focus on the M2C model to provide consumers with high-time, low-cost and good service products in the sinking market. As of September 2021, the annual active consumers of Taote and Taocai reached 270 million (yoy+200%), and the average daily trading order volume increased by more than 400% compared with the same period last year. We believe that Taote and Taocai will be the main drivers of BABA's future domestic e-commerce AAC and GMV growth, and it is expected that FY2023 will see more orders and GMV conversion in the fiscal year.

3 in terms of organizational structure, on January 6, 2022, Dashan announced the adjustment of the organizational structure of Taobao and comprehensively integrated the two on the basis of insisting on the operation of Taobao and Tmall. Three centers (user operation and development center, industrial operation and development center, platform strategy and operation center) were set up, which are respectively responsible for Xuande, snow blowing and thinking. Live broadcast and shopping will continue to be operated separately, by Daofang and Qiancheng respectively. After this adjustment, Taobao will return to the business nature of enhancing consumer experience and value creation, the user side will continue to optimize the consumer experience link, and the merchant side will move from industry operation to industry operation, in-depth service merchants will bring more efficient operation decisions. In terms of 4EBITA, taking into account the increase in merchant support, we expect the core master business Adjusted EBITA Margin to decline slightly. In terms of investment, we expect the scale of investment in innovative businesses such as Taobao special version and Taocai vegetables to be the same as in the September quarter. To sum up, we expect the core business Adjusted EBITA to be about 49.9 billion yuan (yoy-25%) and Margin about 23% in the December quarter.

Ali Yun: basic technical capabilities remain ahead, but the impact of head customers and the education industry still exists. According to the Gartner,2021 year, Aliyun's IaaS+PaaS comprehensive capability ranks third in the world, in which computing, storage, network, security and other basic capabilities rank first in the world, and the database field enters the Gartner leadership quadrant. In terms of revenue, public cloud revenue has slowed down due to the influence of head customers, education, games and other industries; in hybrid cloud, government and enterprise digital expenditure has been affected by macro pressure, the budget has declined slightly, and the decision-making cycle has been slightly extended. We expect the company's cloud computing revenue to grow by about 25% year-on-year in the December quarter. AdjustedEBITA Margin is slightly higher than the previous quarter.

How to view the future growth direction of BABA? According to BABA CEO Zhang Yong, BABA's three strategic cores are domestic demand, globalization and high technology. In terms of domestic demand, we expect BABA FY2022 to achieve the domestic AAC target of 1 billion by the end of the year. It is expected that after the FY2023 year, the development goal of innovative business such as Taote and Taocaicai will change from AAC growth to order number and GMV growth. At the same time, the company is expected to continue to improve the product richness and efficiency of merchant services, which will be transformed into revenue and profit growth.

In terms of internationalization, BABA appointed Jiang Fan to be in charge of overseas digital business after a new round of organizational structure reform. Jiang Fan's proven user growth, traffic operation and other capabilities are expected to help BABA International from AAC2.85 billion (September 2021) to the long-term goal of 1 billion International AAC. In terms of science and technology, Aliyun will focus on cloud computing and big data to provide the basis for industrial and social digitization to drive business growth. According to Gartner, China's cloud computing market will be US $32 billion in 2020, and the agency expects China's cloud computing market to reach 37% CAGR in 2020-2025 and US $154 billion in 2025. Aliyun, as the leading domestic cloud computing manufacturer, will continue to benefit from the development dividend of the domestic cloud computing industry.

Risk factors: the risk of operation adjustment caused by antitrust and other policy regulation; the risk of financial business facing regulatory risks; the risk of declining performance caused by slowing penetration of the e-commerce industry and the higher-than-expected competition of e-commerce platforms; the risk of declining performance caused by the slowdown of macroeconomic growth; the risk that the epidemic affects the performance decline caused by exceeding expectations; the drag on profits caused by the layout of foreign investment; the friction factors between China and the United States that affect business development and stock price fluctuations, etc. The risk of delisting of US stocks, etc.

Profit forecast, valuation and investment advice: we maintain BABA Group's forecast revenue of 858.3 billion yuan / 1.0137 trillion yuan / 1.1729 trillion yuan in fiscal year 2022-2024, which is + 20% of the same period last year. The net profit (Non-GAAP) is forecast to be 133.4 billion yuan / 161 billion yuan / 1881 billion yuan, compared with the same period last year. The current price corresponds to the company's Hong Kong stock PE (Non-GAAP) 16x/14x/12x. We give the core business 15x PE and cloud computing 10x PS, taking into account Cainiao and other business valuations. Based on the SOTP valuation method, we maintain the company's Hong Kong stock target price of HK $210m / share and US stock target price of US $215m / ADR. We believe that the decline in the company's share price since the September quarter largely reflects the pessimistic expectations of short-term fundamentals. the future recovery of the consumer industry, the optimization of e-commerce competition and the faster-than-expected growth of the company's cloud computing and innovation business are expected to be the catalysis of the company's stock price upward. we maintain a relatively optimistic attitude about the company's medium-and long-term digital business service capacity and maintain the "buy" rating of the company's Hong Kong and US stocks.