Review of 1QFY23 performance: revenue structure is stable, profit exceeded expectations in this quarter, the company's operating income of 205.555 billion yuan, remained stable compared with the same period last year. Among them, China's business income is 141.935 billion yuan, yoy-1% is better than expected, mainly due to Taobao Tmall GMV year-on-year decline in the median. Local life services complement the scene of home-to-home consumption among epidemics and gain opportunities for growth. The company's adjusted net profit and adjusted EBITA were 302.52 and 34.419 billion yuan respectively, recording yoy-30% and-18%, both significantly higher than market expectations.
Core business: the consumption matrix complements each other, and the inflection point clearly shows that the company continues to implement the business philosophy of high-quality growth in fiscal year 2023, so that the stickiness of China's most capable groups to BABA's China business consumption matrix continues unabated. According to QuestMobile data, the monthly active users of Taobao, Pinduoduo and JD.com were 870 million, 640 million and 440 million respectively by the end of June, covering the largest number of active users in China. In addition, user stickiness continues to improve in the context of this year's epidemic, and has recorded an increase in 3.3pct. The zero growth rate of the society has become positive in June, and with the improvement of the efficiency of customer acquisition and retained user management across business sectors, and the acquisition of wallet shares for different user circles, the prospects for China's business revenue and profit margins are clear.
During the epidemic in Shanghai, Beijing and other mega-cities, local life services undertake the important task of ensuring people's livelihood. The complementarity of business and categories shows the sufficient flexibility of the consumption matrix, and the food and beverage takeout orders of ele.me are affected by the epidemic. The takeout business of required consumer items is growing rapidly. The increase in average order volume, efficient user growth strategy and logistics cost control measures have helped ele.me become a regular UE in the current quarter. Ele.me is building the mental transformation of users from catering takeout to daily takeout, and it is expected that losses in ele.me 's fiscal year will continue to narrow.
Cloud computing: short-term delivery pressure, long-term opportunities are abundant
China has the largest number of small and medium-sized enterprises in the world, and the improvement of industrial concentration and digital upgrading is the general trend. The epidemic is only a drag on the process in a short period of time, and the cloud computing market has a "long slope of thick snow".
There are structural opportunities, with the proportion of non-Internet users rising to 53 per cent year-on-year 5pct this quarter. In addition, BABA is China's largest public cloud service provider, with a market share of 41 per cent in 2020 and a higher market share in the Asia-Pacific market than early players such as Amazon.Com Inc and Microsoft Corp, reaching 25 per cent. The market scale grabs the position, unifies the unceasing high technical barrier, the long-term opportunity is abundant.
Investment suggestion
We expect the company's FY2023-2025 operating income to reach 902.9 billion yuan, 994 billion yuan and 1.0953 trillion yuan respectively, with growth rates of 6%, 10% and 10% respectively, and adjusted net profit of 116.8 billion yuan, 131.1 billion yuan and 1643 yuan respectively, representing growth rates of-14%, 12% and 25%, respectively. BABA China's business consumption matrix shows high resilience in response to the short-term disturbance of the epidemic, and business complementarity nourishes the development of local life services ele.me and Gaode. With the normalization of the epidemic and the return of total retail sales of consumer goods to pre-epidemic levels, the core business section is expected to rebound faster. The epidemic affects the economic level and the delivery of cloud computing products, but the "long slope and thick snow" in the digitization process of Chinese enterprises is especially true. Cloud computing leader Ali Yun released CIPU to consolidate technical barriers at the Aliyun Summit in 2022, which became the "second curve" of BABA's performance. Through the SOTP valuation method, the reasonable market capitalization of the company is HK $2.879 trillion and the share price is HK $158. the company maintains a "buy" rating.
Risk hint
Macroeconomic slowdown risk; epidemic risk; Internet-related policy risk; new business lower-than-expected risk