According to BABA's quarterly report on 2Q2023FY on November 17, 3Q22 achieved 207.2 billion yuan in revenue, up 3 percent from the same period last year.
The operating profit was 25.1 billion yuan, an increase of 68% over the same period last year, and the adjusted EBITA was 36.2 billion yuan, an increase of 29% over the same period last year. The net profit of dome NonmurGAAP was 33.8 billion yuan, an increase of 19% over the same period last year. The retention rate of high-quality consumer groups is eye-catching. As of 3Q22 (LTM), the per capita consumption of active users has exceeded 10, 000 yuan in about 124 million years, and the retention rate is 98%.
Brief comments:
The company's 3Q22 revenue increased by 3% over the same period last year, operating profit of 25.1 billion yuan increased by 68% over the same period last year, and adjusted EBITA 36.2 billion yuan increased by 29% over the same period last year. Nonmuri GAAP net profit increased by 19% over the same period last year. We believe that 3Q22's performance has the following bright spots: ① postponed listing at the end of the year-the new buyback reflects the company's long-term confidence: although the company postponed the dual listing because of employee stock ownership plans, it also announced a new $15 billion buyback plan; ② cut costs and efficiency to improve the profit margin of core business: 3Q China business EBITA profit increased by 6% year-on-year, profit margin reached 32%.
We believe that the edge of competition in the ① industry slows down: Douyin and Kuaishou Technology test the waters of shelf-type e-commerce. We expect that the competition between live e-commerce and integrated e-commerce will soon enter the competition of repurchase rate and user stickiness. In the follow-up, the competitive pressure of live e-commerce on integrated e-commerce platform will slow down. The core barrier of ② is higher: from the perspective of GMV, the low single digits decline of Q3 and GMV during the Singles' Day holiday in the depressed macro environment, which are the same as the same period last year, once again verify Taobao & Tmall in the brand merchants & consumers' mind. ③ macro environment improvement: from the industry point of view, the policy environment improvement (specific measures to support the healthy development of platform economic norms are expected) and the Internet cash business with the marginal improvement of economic repair, it is expected that the future is basically oriented, the industry is expected to usher in a dual repair of performance and valuation, it is recommended to focus on BABA.
1.3Q22 revenue increased by 3% year-on-year, adjusted EBITA year-on-year growth of 207.2 billion yuan 29%3Q22 revenue increased by 3% year-on-year; adjusted EBITA 36.2 billion yuan increased by 29% year-on-year; adjusted EBITA rate of 17%, an increase of 3pct over 3Q21. The net profit of Non-GAAP was 33.8 billion yuan, an increase of 19% over the same period last year.
Sub-segment, ① China Business: 3Q22 China Business total revenue is 135.4 billion yuan, down 1% from the same period last year; of which customer management income is 66.5 billion yuan, down 7% from the same period last year. According to the division, China's retail revenue was 131.2 billion, down 1% from the same period last year, while China's wholesale revenue was 4.2 billion yuan, up 1% from the same period last year. The adjusted EBITA of the Chinese business branch totaled 44 billion yuan, with an adjusted EBITA rate of 32%, an increase of 2pct over the same period last year. The decrease in 3Q22 income is mainly due to reduced consumer demand, repeated COVID-19 epidemic and continued competition; the increase in EBITA profit margin is mainly due to the narrowing of losses due to the improvement of operational efficiency by Taote and Taocai, which is partly offset by the decline in customer management income. As key categories such as clothing and consumer electronics showed a lower year-on-year decline, the decline in GMV was narrower than that of 2Q22. The market continues to show a steady demand for interest-based consumer categories such as health products, outdoor activity equipment, pet care and so on. We believe that the high retention rates achieved by the high consumer groups of Taobao and Tmall, as well as the significant narrowing of losses in key strategic businesses such as Taobao and Amoy, have helped to push the fundamentals into a state of repair.
② international business: 3Q22 revenue of 15.7 billion yuan increased by 4% over the same period last year, of which international retail revenue increased by 3% year-on-year in 10.7 billion; international wholesale business revenue increased by 6% in 5 billion compared with the same period last year. The growth mainly came from value-added services related to cross-border business.
The international business division adjusted EBITA for a loss of 960 million yuan and a profit margin of-6 per cent higher than the same period last year. 10pct.
③ cloud computing: the revenue of 3Q22 Aliyun business division after offsetting the impact of cross-segment transactions increased by 4% compared with the same period last year; after adjusting EBITA 434 million yuan, the profit margin was 2% year-on-year plus 0pct. 3Q22's non-Internet customer revenue increased 28% year-on-year and accounted for 58%, mainly driven by the financial services, public services and telecommunications industries. 3Q Aliyun's self-research technology highlights include: a) Progress in hardware research and development: BABA's core business has widely used the CIPU system, which significantly improves Aliyun's computing power and efficiency. Performance under this new architecture shows more than 20% improvement over the industry average; b) focus on cost-effectiveness: BABA Dharma House released the ModelScope Model as a Service (MaaS) platform, which provides more than 300 "out-of-the-box" artificial intelligence models developed by BABA Dama House, covering a wide range of areas such as computer vision and natural language processing. C) serverless core products: Aliyun has implemented server lessening of more than 20 core products and will do server lessening for more product categories in the future.
④ local life service and rookie: 3Q22 local life service income increased by 21% over the same period last year. The number of 3Q orders increased by 5% over the same period last year, mainly driven by Gaud. After offsetting cross-segment transactions, 3Q22 rookie revenue of 13.4 billion yuan increased 36 per cent year-on-year. 3Q22 local life service adjusted EBITA loss of 3.5 billion yuan, profit margin-27% year-on-year increase of 33pct; rookie adjusted EBITA 125 million, profit margin 1% year-on-year increase 4pct.
⑤ digital media and entertainment: 3Q22 revenue 8.4 billion yuan, an increase of 4% over the same period last year, adjusted EBITA loss of 117 million, loss rate of-1%.
⑥ innovation business and others: 3Q22 revenue was 409 million yuan, down 45% from the same period last year, while adjusted EBITA lost 1.9 billion yuan, mainly due to increased investment in technology and innovation.
two。 Core business: the retention rate of high consumer groups in retail business is bright, and there is much room for fundamental improvement under the opportunity to repair the epidemic. ① China Retail: 3Q22 domestic retail income is 131.2 billion yuan, down 1% from the same period last year, accounting for 63% of total revenue. Of this total, customer management income fell 7 per cent year-on-year to 66.5 billion yuan; online physical goods GMV (excluding unpaid orders) of Taobao and Tmall declined in single digits compared with the same period last year; and revenue from direct sales and other businesses increased by 6 per cent year-on-year, mainly driven by box horses and Alibaba Health Information Technology.
In the 12 months to September 30, 2022, consumers spending more than 10, 000 yuan on Taobao and Tmall maintained about 124 million, with a retention rate of 98%. Even in the face of the challenges of the macro environment and the impact of COVID-19 's epidemic situation, Tmall's GMV during Singles Day in 22 years was the same as the same period last year, and more than 290000 brands participated in Singles' Day in 22 years, covering 7000 categories of goods. We believe that the low-digit decline of Q3 and GMV during the Singles Day holiday in the depressed macro environment, and the same results as the same period last year, once again validate the platform's core competitiveness barrier in the brand merchants & consumers' mental end.
3Q22: payment GMV for M2C products increased by more than 60% over the same period last year. By optimizing the input obtained by users, 3Q Taote significantly narrowed its losses compared with the same period last year, and continued to increase the average consumption and purchase frequency of active consumers. 3Q22 Taocai GMV grew by more than 40 per cent year-on-year, and its losses were significantly reduced year-on-year by optimizing pricing strategies, improving purchasing capacity and reducing operating and implementation costs.
② China Wholesale: 3Q22's domestic wholesale business revenue is 4.2 billion yuan, an increase of 1% over the same period last year, accounting for 2% of the total revenue.
③ international retail: 3Q22 international retail revenue is 10.7 billion yuan, up 3% from the same period last year, accounting for 5% of the total revenue, mainly due to the high order volume and subsidy efficiency of Trendyol e-commerce business, of which the overall order of Trendyol increased by more than 65% compared with the same period last year. At the same time, due to the lifting of epidemic restrictions in Southeast Asia, Lazada orders in this region fell compared with the same period last year, and offline channel shopping activities returned to normal. Lazada continues to improve realizability and operational efficiency by providing more value-added services, with losses per unit of 3QLazada narrowing by more than 25 per cent year-on-year.
④ International Wholesale: 3Q22 International Wholesale Business income of 5 billion yuan, an increase of 6% over the same period last year.
⑤ local life services: 3Q22 local life business income of 13.1 billion yuan, an increase of 21% over the same period last year; the overall order growth of 5% over the same period last year, mainly driven by Gaode orders. Due to the increase in the average order volume, 3Q22 ele.me reduced the delivery cost per order and optimized the input obtained by users to improve its economic benefits; the adjusted EBITA year-on-year loss narrowed.
⑥ Cainiao: after 3Q22 offsets cross-segment transactions, Cainiao's business revenue is 13.4 billion yuan, up 36% from the same period last year, accounting for 7% of the total revenue; the income before offsetting is 18.3 billion yuan, up 26% from the same period last year, of which 73% comes from external customers.
3. Gross profit margin 36.7%. Net profit of NonMutual GAAP increased by 19% over the same period last year.
The gross profit of 3Q22 was 36.7%, up 25.1 billion yuan from the same period last year, up 68% from the same period last year, and the operating profit margin was 12%; the adjusted EBITA profit was 36.2 billion yuan, an increase of 29% over the same period last year; the net loss of home was 20.6 billion yuan; and the net profit of Non-GAAP was 33.8 billion yuan, an increase of 19% over the same period last year.
The 3Q22 expense rate is 24.5%, which is a decrease of 3.3pct compared with the same period last year. Among them, the general and administrative expense rate increased by 5.1% year-on-year 0.7pct, product development expense rate 7.3% year-on-year minus 0.3pct, sales and marketing expense rate 10.8% year-on-year minus 3.6pct.
By the end of 3Q22, cash and cash equivalents, short-term investments and other financial investments totaled 484.9 billion yuan, mainly due to operating activities and the appreciation of the US dollar against RMB, partially offset by cash payments from share buybacks and investment and acquisition activities.
The net operating cash flow of 3Q22 was 47.1 billion yuan, an increase of 31% over the same period last year, an increase of 35.7 billion yuan in free cash flow and an increase of 61% over the same period last year, mainly due to the narrowing of losses caused by the improvement of its operational efficiency by some businesses, as well as the reduction of capital expenditure and the purchase of authorized copyrights.
4. Update profit forecast: 2023FY-2025FYNon-GAAP net profit is expected to be 126.9 billion yuan, 142.4 billion yuan and 158 billion yuan respectively, down 7%, up 12% and 11% respectively. Give the company 2023FY an overall reasonable market capitalization range of US $351 billion-408.2 billion, HK $2.8 trillion-HK $3.2 trillion, and a reasonable value range of HK $130-HK $151a per share.
Taking into account the business structure, we give the division valuation, valuation methods and key assumptions to the company as follows:
(1) give 2023FY China Business 10-12xPE, corresponding to US $148 billion-177.7 billion; give other businesses such as New Retail 1xPS, International Business 1-1.5xPS, Cloud Computing 6-8xPS, Local Life platform 3xPS, Gotech, UC, etc. 2xPS; (2) Cainiao refers to the November 2019 transaction valuation of US $27.5 billion. (3) among the major equity investments, the financial business (33%) is valued according to the single-user market value method, and the equity market value of other equity investments is measured according to the market value in 2022-11-23.
Give the company 2023FY an overall reasonable market capitalization range of US $351 billion-408.2 billion, HK $2.8 trillion-HK $3.2 trillion, and a reasonable value range of HK $130-HK $151a per share.
Risk tips: increased competition; cultivation pressure of new retail, entertainment and innovative business; transnational expansion risk and so on.