Alibaba 4QFY23 performance forecast: We expect the company's 4QFY23 revenue to +1.2% year on year to 206.6 billion yuan, adjusted EBITA to 22.3 billion yuan, and the corresponding adjusted EBITA profit margin of 10.8%. Net profit attributable to ordinary shareholders after the adjustment is estimated to be 26 billion yuan, and the corresponding adjusted net interest rate is 12.6%. Recently, the company announced the launch of the “1+6+N” organizational transformation. Under Alibaba Group, it will establish six major business groups and multiple business companies: Alibaba Intelligence, Taobao Tmall Business, Local Life, Rookie, International Digital Commerce, and Big Entertainment. Furthermore, in the future, business groups and companies that meet the requirements are expected to achieve independent financing and listing.
Core e-commerce business is gradually recovering, and international retail business is growing healthily: ① On the Chinese business side, we expect CMR revenue to be -3.7% year over year to 61.1 billion yuan during the quarter (vs. -8.7% compared to the previous quarter). Since February, platform apparel, sports, and outdoor categories have shown a recovery momentum. At the same time, along with the gradual recovery of supply chain logistics, the difference in growth rate between GMV and CMR has narrowed somewhat this quarter. Direct revenue is expected to be -2.5% year-on-year, mainly due to a slowdown in the growth rate of Hema's business after the epidemic gradually abated. In the strategic sector, Taote Taotai's vegetable business continues to focus on improving operational efficiency. The adjusted EBITA of Chinese businesses is expected to increase 6.5% year-on-year to 34.2 billion yuan during the quarter, partly offset by a year-on-year decline in CMR. ② International commercial revenue is expected to increase 13.8% year-on-year to 163 billion yuan this quarter, mainly due to healthy growth in international retail revenue. Among them, Lazada's monetization efficiency has steadily improved, and Trendyol orders have maintained strong growth. AliExpress Choice (AliExpress Choice) was launched within the quarter, focusing on cost-effective products, and providing free delivery and return services to users in some countries and regions.
The public cloud drives revenue growth, and the launch of the AI model “One Thousand Questions” drives intelligent innovation: Alibaba Cloud's revenue is expected to be +4.5% year-on-year to 19.8 billion yuan during the quarter, mainly driven by public cloud revenue growth. Hybrid cloud projects were affected by the previous pandemic and macro, and single leading customers gradually stopped using overseas cloud services due to business adjustments, and it will still take some time to recover. Recently, Alibaba Cloud announced the launch of its self-developed model “One Thousand Questions”. In the future, all of Ali's businesses will be fully upgraded to “One Thousand Questions” to help enterprises innovate intelligently through AI.
Investment advice: Maintain the Buy-A rating and SOTP target price of HK$136. The company focuses on high-quality growth, emphasizes serving core consumer groups, strengthening the construction of digital business infrastructure and continuing to promote technological innovation, and continuously optimizes operating efficiency driven by cost reduction and efficiency measures. The profit margins of many business lines have improved markedly. We expect FY23/24 revenue to increase 1.6%/10.9% year over year, with adjusted EBITA of 144.9 billion yuan/162.3 billion yuan.
Risk warning: The pandemic has repeatedly affected business recovery; retail revenue growth in China has slowed; investment in strategic investment has been higher than expected, dragging down profit margins.