This report is read as follows:

Under the general environment, BABA's performance exceeded expectations through a strong cost reduction this quarter, but the downturn in the business boom in China and the inflection point of the share still take time. Under the background of changes in liquidity expectations and marginal policy improvement, it is expected to take the lead in valuation repair.

Summary:

Efficiency drives performance to exceed expectations. Maintain the adjusted return net profit of FY2023/24/25 to 2089,232.7 billion yuan in the fiscal year. Taking into account the competition pattern and prosperity, the SOPT valuation method is adopted to maintain the target price of HK $109.58 and increase the holding.

Performance summary: operating income 207.2 billion / + 3.23%VS expected 210 billion; adjusted net profit 33.8 billion / + 18.56%; adjusted EBITA 36.164 billion / + 29%, exceeding 33.6 billion of BBG consensus expectations, adjusted EBITDA 43.3 billion / + 24.3%.

China's business has been hit by the epidemic but shows resilience, and the fluctuation of monetization ability needs to be improved. ① domestic business boom still has to wait for the inflection point, GMV and CMR revenue is still negative, but compared with 22Q2 has narrowed, considering the uncertainty of 22Q4 is expected to be difficult to correct, short-term economic demeanor improvement is expected to be after 23Q1; ② GMV and CRM differentiation, monetization decline is mainly affected by low return and recommended liquidity efficiency ③ demand downturn consumer decision-making process becomes longer, impulse consumption decreases and purposeful consumption increases, which affects the conversion rate of recommendation flow and the ability of monetization. The interactive conversion efficiency of recommendation flow on the home page of Amoy system still needs to be improved and adapted to the new consumption characteristics. The total growth rate of ④ cloud computing is lower than expected, but there are bright spots in structural growth. Excluding the impact of the head Internet, non-Internet revenue is + 27%. It is expected that the growth rate of cloud computing will recover after the base impact is eliminated.

After reducing cost and increasing efficiency, it needs the support of landscape demeanor and share inflection point. ① 's better-than-expected results this quarter are more due to efficiency improvement, loss reduction of new business and shrinking marketing investment; the persistence of lean growth strategy makes the above profit margin improvement sustainable; ② BABA's fundamental inflection point marks that GMV and CMR return to positive year-on-year growth in the short term, while BABA's share in e-commerce stabilizes in the medium to long term. The flow dividend of ③ content platform is also getting farther and farther away, and the proportion limitation of commercial traffic will inevitably go to the areas familiar to e-commerce on integrated platforms such as operation, supply and implementation. In the future, e-commerce will be the coexistence of shelves, content and other forms of business, and the stabilization of BABA's share will constitute an important symbol of the change in prosperity in the medium term; under the catalysis of expected changes in liquidity and marginal improvement in the Internet policy of the platform, BABA, whose valuation is expected to be at the bottom, is expected to usher in valuation repair; and the fundamental inflection point driven by subsequent boom and share stabilization still needs to wait.

Risk hint: industry competition aggravates risk; antitrust policy risk; data security supervision risk.