BABA released FY2023Q1 results, with operating income of 205.56 billion yuan in the quarter,-0.1% compared with the same period last year, and adjusted EBITA of 34.42 billion yuan, compared with-17.5% of the same period last year. The home net profit of Nonmusic GAAP was 31.36 billion yuan, which was-31.5% of the same period last year. We believe that under the disturbance of the epidemic, the company's core business shows operational resilience, continues to reduce costs and efficiency to improve business quality, the long-term competitive advantage remains stable, and the "highly recommended" investment rating is maintained.
Revenue growth slowed down compared with the same period last year, and EBITA profit margins were better than expected under cost reduction and efficiency. FY2023Q1 achieved operating income of 205.56 billion yuan,-0.1% year-on-year, mainly due to a decline in revenue from China's business division, partly offset by a + 10% year-on-year increase in cloud business revenue. In terms of profit, the company achieved operating profit of 24.94 billion yuan,-19% year-on-year, adjusted EBITA to 34.42 billion yuan,-18% year-on-year, mainly due to the decline in CMR, partly offset by narrowing business losses such as Amoy vegetable shopping and local living services. It is expected that reducing costs and increasing efficiency will lead to continuous improvement of profit margins in the future.
China's commercial GMV growth has gradually recovered, and the new business has achieved remarkable results in reducing losses. The revenue of FY23Q1 China Business was 141.94 billion yuan, down 1.5% from the same period last year, of which customer management income was 72.26 billion yuan, down 10.1% from the same period last year. Under the influence of repeated epidemic situations in April and May, the number of GMV in Taobao Tmall decreased in a single quarter compared with the same period last year. With the gradual recovery of logistics capacity and the strong promotion of GMV in June, the growth rate of GMV has greatly improved. In terms of new business, Taote and Taocai GMV maintained rapid growth, Taobao and Taobao M2C goods payment GMV increased by more than 40% in June quarter. At the same time, the company optimized investment strategy, reduced procurement and operating costs, achieved remarkable results in reducing losses in new business, reduced month-on-month losses in Taobao vegetables, and significantly narrowed Taote losses compared with the same period last year and month-on-month.
Under the influence of overseas policies and international situation, the growth rate of international business has slowed down and continued to promote cost optimization. The revenue of the FY23Q1 international business sector reached 15.45 billion yuan, an increase of 1.6% over the same period last year, of which the international retail revenue was 10.52 billion yuan, down 2.6% from the same period last year, mainly due to the reduction of AliExpress orders due to the revision of the EU VAT policy and the interruption of the logistics supply chain caused by the conflict between Russia and Ukraine. The international wholesale business revenue increased by 12% over the same period last year, mainly benefiting from the steady growth of industrial products transactions at BABA International Station. In terms of profit, the adjusted EBITA loss of FY23Q1 International Business was-1.57 billion yuan, and the profit margin decreased 3.4pct compared with the same period last year, mainly due to the investment in new business of Trendyol, partly offset by the revenue growth and operational efficiency improvement of Lazada. It is expected that reducing cost and increasing efficiency will be the long-term development trend of international business.
The ecological improvement of cloud business customers is expected to maintain sustainable growth. The total revenue of FY23Q1 cloud business after offsetting the impact of segment transactions was 17.69 billion yuan, an increase of 10.2% over the same period last year, mainly driven by the business growth of non-Internet customers such as financial services, public services and telecommunications. Non-Internet customers accounted for 53% of the revenue by the end of June 2022, helping the company effectively resist the risk of slowing down the growth of Internet customers.
In terms of profits, the company increased expenditure on Aliyun technology research and development and nailing products and services, and FY23Q1 adjusted EBITA to 250 million yuan,-27% compared with the same period last year. With the continuous improvement of Aliyun ecosystem construction, as well as the development of long-term customer value and the improvement of user stickiness under the iteration of nail product functions, cloud business is expected to achieve sustainable revenue growth and profit improvement.
The operational efficiency of local living services has been optimized, and the loss has been greatly narrowed. The income of FY23Q1 local living services reached 10.63 billion yuan, + 5.3% year-on-year, mainly benefiting from the income growth brought about by the improvement in the efficiency of subsidies. At the same time, the increase in the unit price of ele.me and the decline in customer acquisition and distribution costs led to the improvement of UE, and the loss of home business narrowed. FY23Q1 adjusted EBITA to-3.04 billion yuan, a loss of 4.77 billion yuan compared with the same period last year to significantly reduce losses.
Investment advice: the uncertainty of the epidemic situation puts short-term pressure on BABA's performance, but at the same time, the company continues to optimize the cost structure, improve business quality, and tap the operational certainty in an uncertain environment so as to achieve long-term high-quality development. We believe that the company's business competitiveness in China remains stable, and we are optimistic that the future rapid development of cloud computing, international business and other businesses and improved profitability will contribute to the company's revenue and profit increment, and maintain a "highly recommended" rating.
Risk tips: the epidemic lasted longer than expected; the industry competition intensified; the company's new business development did not meet expectations.