Overall performance: Revenue was basically the same year over year, and the profit profit of local living improved markedly. The FY2023Q1 company achieved operating income of 205.6 billion yuan, down 0.1% from the previous year. The main reason for the low revenue increase was that customer management revenue from Tmall and Taobao recorded negative growth due to the impact of the pandemic. The FY2023Q1 company's non-GAAP net profit was $30.3 billion, a decrease of 30% over the previous year, and the non-GAAP net interest rate was 15%. The reason for the negative increase in profit was the negative increase in customer management revenue and the loss recorded in equity accounting investment income. Thanks to management's efforts to reduce costs and increase efficiency, business losses in various sectors have been reduced this quarter.
The Hungry Unit Economic Model turned positive for the quarter, and the local lifestyle sector lost 1.9 billion yuan a quarter.
FY2023Q1 Alibaba bought back ADR for around $3.5 billion. The current $25 billion buyback plan still has $12 billion available.
E-commerce: The growth rate of customer management revenue was the lowest during the year, and is expected to improve in the second half of the year. FY2023Q1's core commercial revenue was 180.2 billion yuan, down 0.4% from the previous year. Among them, customer management revenue reflecting the performance of Taobao and Tmall was 72.3 billion yuan, down 10.1% from the previous year. Taobao and Tmall GMV achieved negative growth of medium units this quarter, mainly due to supply chain and logistics disruptions caused by the April and May epidemics. A slow recovery began in June, and Tmall 618 achieved positive year-on-year growth in payment GMV. We estimate that the growth rate of customer management revenue this quarter was the lowest for the whole year, and there will be an improvement in the second half of the year.
Cloud business: Demand is poor, and revenue growth continues to be low. The FY2023Q1 cloud business revenue was 17.7 billion yuan, up 10.2% year-on-year, slightly lower than the 12.5% growth rate in the previous quarter. On the profit side, the adjusted EBITA profit margin of the cloud business remained at 1.4% this quarter and continued to be profitable. The cloud business continued to face weak demand in the internet and education industries this quarter, while the finance, telecommunications, and public services industries recovered somewhat. The revenue contribution of the non-Internet industry reached 53%, up 5% from the same period last year.
Risk warning: policy supervision brings about business adjustments; systemic risks due to uncertainty about the global pandemic; risks of worsening the competitive pattern in the e-commerce industry, etc.
Investment advice: Maintain an “increase in holdings” rating.
Alibaba's core e-commerce platform business is currently under pressure from a macroeconomic slowdown and an impact on core categories. We estimate that FY2023Q1 e-commerce business growth reached a low point during the year due to the pandemic, and there will be some improvement in the second half of the year. Management's cost reduction and efficiency plans are beginning to bear fruit. We slightly raised our profit forecasts to reflect the company's narrowing losses in businesses such as Taotte, Hema, and Hungry. The valuation was carried out using the segmented valuation method, and the corresponding valuation range for 2022 was HK$145-157, an increase of 1%/1% respectively to maintain the “increase in holdings” rating.