Ali's 23Q4 fiscal quarter adjusted EBITA continued to improve year over year. Ali's revenue for the 23Q4 fiscal quarter was 208.2 billion yuan, an increase of 2% over the previous year. Among them, Chinese commerce, international commerce, local life, rookie, and cloud businesses were 1361/185/125/136/136/186 billion yuan respectively, a year-on-year change of -3%/29%/17%/18%/-2%. Adjusted EBITA increased 60% year over year to $25.3 billion. The adjusted net profit of the mother was 28 billion yuan, an increase of 30% over the previous year.
Revenue for fiscal year 2023 was $868.7 billion, up 2% year over year. Adjusted EBITA increased 13% year over year to $147.9 billion. The adjusted net profit of the mother was 144 billion yuan, an increase of 0.3% over the previous year.
Business in China: E-commerce GMV resumed growth in March, boosting e-commerce investment. On the Chinese commercial side, customer management revenue for the 23Q4 fiscal quarter was 60.3 billion yuan, down 5% from the previous year, and the decline narrowed. Excluding unpaid orders, the number of units of Taobao Tmall's online physical product GMV declined year-on-year in the March quarter, but as consumption gradually recovered, the growth rate was corrected in March, and the main impetus came from strong growth in clothing and health products.
In the future, Taotao will focus on the three strategies of “user first, ecological prosperity, and technology driven”. 1) Continued investment on the user demand side, including richer product supply, differentiated content supply, etc., to expand the number of users and increase user time. 2) The platform mechanism is more open and inclusive, empowers merchants, and promotes ecological prosperity. 3) Focus on investment in science and technology.
Cloud computing: Focus on technological breakthroughs and promote the popularization of computing power. Alibaba Cloud's revenue fell 2% this quarter, and hybrid cloud is still under pressure. Looking at the customer structure, the revenue contribution of non-internet customers rose steadily to 55%. The adjusted EBITA margin for the cloud business this quarter was 2.1%, an increase of 0.3 pct over the previous quarter. In the future, Alibaba Cloud will 1) focus on technological breakthroughs, enrich the product line, and make every effort to build its own AI pre-training model; in April, Alibaba Cloud released a thousand questions about the big language pre-training model; 2) provide computing power support. Recently, Alibaba Cloud introduced new products and pricing policies, which are expected to further expand the number of public cloud customers and the scale of cloud usage.
International commercial orders have resumed growth, and local living needs have continued to improve. In terms of international commerce, overall international retail orders increased 15% year-on-year this quarter. AliExpress launched the Choice service this quarter, which led to double-digit growth in orders. In terms of local living, orders increased by more than 20%, and losses continued to narrow. Among them, in the destination business, business orders grew rapidly year over year, with Gaode Daily Activity users reaching a record high of 150 million, and Flying Pig's domestic hotel reservation value in March increased by more than 70% compared to the same period in 2019. In the door-to-door business, Hungry GMV and orders increased significantly, and the average UE alone continued to be positive and improved year over year.
Multiple businesses have begun financing and listing plans, and Ali has entered a new stage. Alibaba, founded in 1999, ushered in major structural changes in 2023. In March, Ali announced the launch of “1+6+N” organizational transformation. In May, in its financial report, Ali officially announced six major groups and their boards of directors, including Cloud Intelligence Group, Taotian Group, Local Life Group, International Digital Business Group, Cainiao Group, and Big Entertainment Group; and many businesses may be independently financed or listed in the future.
At present, the board of directors has approved: 1) Cloud Intelligence Group is completely spun off, seeking to become an independent listed company. 2) International digital commerce seeks external financing. 3) Rookie explores the listing process. 4) Hema implements listing plans. On the one hand, this split and adjustment helps release shareholder value, and on the other hand, it is also the starting point for the restructuring and re-establishment of Ali's various businesses.
Maintain a “buy” rating. We expect Ali's revenue for the 2024-2026 fiscal year to be 9497/10219.1084.3 billion yuan; non-GAAP net profit to the mother will reach 1552/1701/182.4 billion yuan. Based on core e-commerce 10x 2024e P/E, cloud computing 5x 2024e P/S, entertainment 2x 2024e P/S, innovative business 2x 2024e P/S, and innovative business 2x 2024e P/S, Alibaba Hong Kong stock (9988.HK) was given a target price of HK$134/US stock (BABA.N) of 138 dollars to maintain the “buy” rating.
Risk warning: The impact of industry policies on business has exceeded expectations, progress in e-commerce and cloud computing has fallen short of expectations, and changes in the macro-environment have exceeded expectations.