The overall income was in line with expectations, and the profit side performed brightly. FY1Q2023, the company realized operating income of 205.6 billion yuan (yoy+0%), slightly higher than our expectation of 202.8 billion yuan (yoy-1%), realized adjusted net profit of 30.3 billion yuan (yoy-30%), exceeded our expectation of 29.4 billion yuan (yoy-32%), and adjusted net profit margin of 15% (- 6pct). The adjusted EBITA is 34.4 billion yuan (yoy-18%), exceeding our expectation of 29.4 billion (yoy-30%), and the profit margin of adjusted EBITA is 17% (yoy-4pct). The profit side's performance is brighter than expected.
China Business: CMR performed in line with expectations, and the new business achieved significant loss reduction. FY1Q2023, the company's China business segment achieved an income of 141.9 billion yuan (yoy-1%), with an adjusted EBITA of 41.4 billion yuan (profit margin of 29% yoymuri 6pct). 1) CMR&GMV: realized CMR income of 72.3 billion yuan (yoy-10%), GMV showed a decline in the number of medium units (slightly lower than we expected-8.5%), decline in important categories such as clothing, consumer electronics and other important categories suppressed the overall performance of GMV, the rate of order cancellation under the impact of the epidemic was higher than the normal level, and the decline in commission to payment rate led to the difference between GMV and CMR growth rate. 2) users: the company achieved the domestic 1 billion AAC target last quarter, and the core strategy for the future on the user side is no longer to pursue an increase in quantity, but to obtain a larger share of users' wallets through the penetration of different categories. At this stage, there are still the most active consumer groups in China, with the annual ARPU exceeding 10000 yuan and the annual ARPU exceeding 57000 yuan 88VIP reaching 25 million. 3) significant loss reduction in new business: under the condition of achieving ideal growth (GMV of M2C goods of Tate increased by 40% and GMV of Box Horse by more than 30%), the loss was significantly reduced compared with the same period last year, and the strategy of reducing cost and efficiency achieved excellent results. Amoy vegetables achieved a 200% increase in GMV, and under the promotion of optimizing the pricing strategy, improving purchasing capacity and reducing operating costs, the loss also narrowed significantly. 4) FY2Q23 expectations: since July, the company's GMV performance has been better than that of June. Considering the uncertainty of the current macro environment, we expect the company's FY2Q23 to achieve a 1% increase in GMV and a drop of 1% in revenue, while China's business revenue will also increase by 3%.
International business: multiple repressive factors lead to income pressure and significant improvement at the profit end. FY1Q2023, the company's international business segment achieved an income of 15.4 billion yuan (yoy+2%), with an adjusted EBITA of-2.1 billion yuan (profit margin-10% yoymuri 3pct). 1) AliExpress: affected by the VAT tax reform of the European Union, the devaluation of the euro against the dollar, and the conflict between Russia and Ukraine, the overall performance of AliExpress was greatly affected, and the number of orders decreased compared with the same period last year; 2) Lazada: orders increased by 10%, epidemic restrictions lifted in Southeast Asia, offline channels recovered, online growth slowed, the company focused on operational efficiency, and losses narrowed month-on-month and year-on-year. 3) Trendyol: the number of orders increased by 46%. At the same time, the business has been expanded to the local life service business. In the small volume market, the horizontal expansion of the business is conducive to improving the efficiency of the company's early investment. 4) Prospect: the European market will continue to be the key area for the company's future development. At present, the company is continuing to promote infrastructure construction and has more than 8000 employees in Europe. Localized operation will be conducive to the company's long-term development in Europe.
Local life: income growth exceeded expectations, reducing costs and increasing efficiency achieved remarkable results. FY1Q2023, the company's local life sector achieved an income of 10.6 billion yuan (yoy+5%), with an adjusted EBITA of-3 billion yuan (profit margin of-29% yoymilk 19pct). Our expectation is to achieve income of 9.6 billion (yoy-5%) and adjusted EBITA of-4 billion (profit margin-41.5%). The negative impact of the epidemic on the local business is relatively small, and both revenue and profit exceed expectations.
1) Home-to-home business (ele.me): food takeout orders were greatly affected during the epidemic, but food, fast consumption, medicine and other takeout increased rapidly compared with the same period last year, and the unit order amount of non-catering takeout was much higher than that of catering takeout, so the overall operation was affected better than we expected, and as the epidemic alleviated, GMV in ele.me returned to positive growth since June. In addition, ele.me benefited from the increase in the single average amount. At the same time, the user's input and single delivery cost are optimized, and the unit economic benefit is positive in this quarter. 2) to destination business (Gaud & Flying Pig): Gaud's DAU reached a new high of 120 million in June, and its destination-based content and service richness continues to improve, helping users to discover and visit local merchants, which will be an important traffic portal for the company in the future.
Rookie: the income performance is stable and the loss is significantly improved compared with the previous month. FY1Q2023, the company's local life sector achieved an income of 12.1 billion yuan (yoy+5%), with an adjusted EBITA of-190 million yuan (profit margin-1.5% yoymuri 0.3pct).
1) China attaches importance to experience improvement: at present, 70% of rookie post stations can provide door-to-door delivery service. we believe that after years of development, the competition of basic elements is nearly complete (the average time limit is about 2.7-2.8 days). The importance of physical experience will continue to increase. 2) International promotion of infrastructure construction: Chinese enterprises' infrastructure investment in overseas e-commerce logistics is still in the early stage. as an industry leader, the company already has 10 overseas sorting centers. more than 7700 smart cabinets have been put into use in Europe. The company focuses on the construction of overseas end-to-end logistics infrastructure, which is conducive to the coordination between its own business, and will also enjoy the dividend of the rapid development of cross-border e-commerce.
Cloud computing: affected epidemic situation and macro-economy, business structure is being adjusted continuously. FY1Q2023, the company's cloud computing sector achieved a revenue of 17.7 billion yuan (yoy+10%), with an adjusted EBITA of 250 million yuan (profit margin 1.4% memyoji 0.7pct). 1) Business structure: the slowdown in cloud business growth is affected by the adjustment of the industry structure. The company's revenue from non-Internet customers reached 53% in the current quarter (yoy+5pct). In the face of weakening demand from Internet customers, the company actively promotes the acquisition of customers from financial services, public services and telecommunications industries, and the business structure is in the stage of adjustment. 2) Prospect: the development of cloud computing business has a strong correlation with macro-economy. In the short term, due to weak macroeconomic performance, growth is expected to slow down. In the long run, there is still a large gap between China's IT expenditure / GDP ratio and that of the United States. In the future, with the macroeconomic cycle going up, the company is expected to achieve healthy and sustainable growth through existing accumulation.
FY2Q23 outlook: revenue growth returns to flat, China's business and overall adjusted EBITA is expected to return to positive growth. 1) Revenue: multi-services are waiting to enter the post-epidemic recovery phase, and FY2Q23 is expected to achieve 212.2 billion yuan in revenue, an increase of 6%. 2) profitability: a number of earnings indicators of the company are expected to show year-on-year improvement in FY2Q23. A) based on the current macro and competitive environment, the company's core platform business still needs to maintain a certain degree of subsidy, so its profit margin may still decline slightly. Taote, Taocai, direct marketing and other businesses have significantly reduced their losses in the current quarter compared with the previous quarter, and the overall loss has entered a lower level. In addition, the company will still implement the strategy of reducing cost and increasing efficiency. It is estimated that the adjusted EBITA of FY2Q23 China will be 42.5 billion (yoy+3%). Profit margin is 30.2% (yoy-0.2pct) and profits are growing again. B) it is expected that the company's international business and local life business will continue to reduce costs and increase efficiency, Cainiao's business will be close to break even, cloud computing profitability will rise steadily, and FY2Q23 as a whole is expected to have an adjusted EBITA of 31.7 billion (yoy+13%) and a profit margin of 15.0% (yoy+1.0pct), with profit margins and profit growth returning to the growth range.
The company's current valuation is historically low, FY2Q23 earnings are expected to improve year-on-year, full-year profit flexibility may be better than expected, investors are advised to actively pay attention to maintain the "buy" rating. The revenue forecast of the adjusted company FY2023-2025 is 895110504 billion yuan (formerly 8979Universe 9751 million), and the adjusted EBITA is 1,480,63417,000,000 yuan (original 1331200,000,000). Segment valuation calculates the company's market capitalization of 2.5748 trillion yuan, corresponding to a share value of HK $141.18, maintaining a "buy" rating.
Risk hint
The impact of the epidemic continues, industry competition intensifies, new business incubation is less than expected, and industry supervision is stricter.