Core views:
Due to the more sluggish consumption environment and the downturn in the advertising industry in the fourth quarter of 2021, we believe that FY3Q22 Ali CMR may experience negative growth (-0.3%), and there is a possibility that the annual revenue guide will be further lowered. (1) According to data from the Bureau of Statistics, the year-on-year growth rates of Social Zero in October and November were 4.9% and 3.9%, respectively, and the year-on-year growth rates of retail sales of online goods and services were 9.5% and 3.2%, respectively. (2) The Tmall battle report shows that the year-on-year growth rate of Double Eleven sales in 2021 was about 8.5%. (3) Vipshop lowered its 4Q21 performance guidelines, reflecting that the boom in optional consumption represented by apparel has fallen short of expectations since mid-November. (4) We believe that FY3Q22 will maintain the trend where CMR growth rate is lower than GMV growth rate, and may continue to FY23; ebita margin will also decline.
We expect the loss amount of strategic business in the FY3Q22 commercial sector to be 20.7 billion yuan (RMB, same below), a slight increase over the previous month. Based on the 2021 Alibaba Investor Day information, we believe that Ali's investment in Taotte, Taocai, and local life is firm, and that the business growth period (catch-up period of competition) will maintain an adequate budget and compete for market share.
Cloud computing revenue for FY3Q22 is expected to increase 21% year over year. On the public cloud side, it is more difficult for this type of customer to contribute incremental revenue because the online education and gaming industries have experienced strong regulation; on the hybrid cloud side, some customers lowered the priority of digital transformation and cut budgets during the economic downturn, which had a negative impact on Alibaba Cloud's revenue growth.
Profit forecast and investment advice: FY22-24 Alibaba's revenue is expected to be 8483/9354/1035.6 billion yuan respectively, corresponding to an increase of 18.3%/10.3%/10.7%, while the net profit of non-GAAP to the mother is 1341/1505/168.2 billion yuan respectively, corresponding to an increase of -25.1%/12.2%/11.8%. Based on the SOTP valuation, the core e-commerce profit of FY23 was given a 12X PE valuation, the cloud computing revenue was given a 10X PS valuation, and the strategic investment portion was superimposed (25% discount), corresponding to the reasonable value of US stocks of $185.95 per ADS and HK$181.33 per share of Hong Kong stocks, all maintained a “buy” rating. We believe that there is little risk that e-commerce industry policies and competition patterns will continue to deteriorate marginally, and that adverse factors have been anticipated by the market. We suggest focusing on opportunities for a reversal in Alibaba's business fundamentals after the impact of competition abates and consumption recovers.
Risk warning: The improvement in the macro environment has been slower than expected; the impact of competition such as Douyin has been stronger than expected; business supervision continues to be tightened; changes in listing status have led to changes in liquidity.