Key points of investment
Revenue and profit for the quarter exceeded expectations: Alibaba's FY2023Q1 achieved revenue of 205.555 billion yuan, a slight year-on-year decline, higher than Bloomberg's unanimous forecast of 203,095 billion yuan. China's commercial revenue fell 1% year over year to 141,935 billion yuan. Bloomberg's unanimous forecast was 140.637 billion yuan, higher than Bloomberg's unanimous forecast. The company's non-GAAP net profit was $30.252 billion, down 30% from the previous year. Bloomberg's unanimous forecast was 28.349 billion yuan, which was higher than Bloomberg's unanimous forecast.
Core business revenue declined year over year, and we expect a rebound after the pandemic: customer management revenue from the company's core cash flow business was 72.263 billion yuan, down 10% from the previous year. Customer management revenue declined, mainly due to repeated COVID-19 disruptions in supply chains and logistics for most of April and May, and the number of GMV units of Taobao and Tmall's online physical product GMV declined. Advertising has been less affected, and commissions have declined significantly due to the impact of the pandemic. CMR is expected to continue to grow in the future after the pandemic is over.
Losses in the local lifestyle business have been significantly reduced, and future profits of various business segments are expected to continue to improve: the absolute value of losses in local lifestyle services narrowed year-on-year, profits from cloud business declined, and the absolute value of losses from digital media and innovative businesses increased year-on-year; due to repeated epidemics and slight increases in Amoy Cai Cai losses, China's commercial profits declined year-on-year. In the future, Amoy Cai will continue to optimize pricing strategies and reduce operating costs. After the summer epidemic is brought under control, the profitability of the Chinese commercial sector is expected to continue to improve; international business is expected to continue to improve; logistics and supply chain disruptions caused by the conflict between Russia and Ukraine; the EU revises value-added tax rules and the euro The impact of the depreciation of the US dollar is also expected to improve profits in the future. Various businesses pay more attention to efficiency and gross profit, and it is expected that losses will continue to be reduced in the future.
Profit forecast and investment rating: Based on reasons such as the spread of the company's domestic epidemic and the impact of overseas wars on overseas supply chains, we adjusted the company's EPS profit forecast for the 2023/2024/2025 fiscal year from $6.1/7.2/8.7 to $6.1/7.2/8.6, corresponding to PE13.7/11.6/9.7 for the 2023-2025 fiscal year (based on the exchange rate of HKD/RMB = 0.86 on the day of 2022/08/05). The company pays great attention to improving the efficiency of various business sectors. Although large-scale investment affects short-term performance, it helps build long-term barriers. Taking into account the company's business growth, competitive advantages and barriers, we believe that the company's current valuation level has strong investment value and maintains the company's “buy” rating.
Risk warning: Competition in the e-commerce industry is intensifying, overseas expansion falls short of expectations, market supervision risks.