Key points of investment
Revenue fell short of expectations, and profits exceeded expectations: Alibaba's FY2023Q4 achieved revenue of 208.2 billion yuan (+2% yoy), slightly below Bloomberg's unanimous forecast of 209.191 billion yuan. China's commercial revenue was 136.073 billion yuan (-3% yoy), lower than Bloomberg's unanimous forecast of 142,237 billion yuan. Non-GAAP net profit of $27.375 million (+38% yoy), Bloomberg's unanimous forecast was $25.383 billion, exceeding expectations.
Core business revenue was under pressure. In March, Taobao and Tmall's online physical goods GMV growth turned positive: CMR revenue fell 5% year over year this quarter, mainly because Taobao and Tmall's online physical goods GMV (excluding unpaid orders) fell about 5% year over year. As consumption in China gradually recovered, Taobao and Tmall's online physical goods GMV (excluding unpaid orders) achieved positive growth in March, driven by strong growth in fashion accessories and healthcare categories. With the end of the pandemic, the gap between CMR and GMV is expected to narrow significantly in 1Q, and CMR is expected to correct throughout the year.
Focusing on profit quality, Hema and Cainiao were approved for IPOs: EBITA's loss rates for international commerce, local lifestyle services, digital media, and innovative businesses all narrowed year-on-year this quarter. With the exception of the cloud computing business, EBITA profit margins for all other businesses declined month-on-month. The overall volume of international retail orders increased 15% year over year, and revenue increased 41% year over year. We expect that in the future, the company will still focus on profit quality. There is still room for new business losses and profit release, and overall profit margins will continue to rise. The board of directors has approved Cainiao and Hema's IPO plans, and approved Ali International Digital Business Group to start exploring foreign financing. The international business, Cainiao, and local lifestyle sectors will become a new engine for performance growth.
Profit forecast and investment rating: Based on the company's profit falling short of expectations, we adjusted the company's EPS profit forecast for the 2024/2025 fiscal year from $7.55/9.37 to $7.16/8.34. We expect the EPS for 2026 to be $9.99, and the corresponding PE for the 2024-2026 fiscal year is 10.44/8.96/7.48 (based on the exchange rate of HKD/RMB = 0.90 on the day of 2023/5/23). The company pays great attention to improving the efficiency of various business sectors. Although large-scale investment affects short-term performance, it helps build long-term barriers. Taking into account the company's business growth, competitive advantages and barriers, we believe that the company's current valuation level has strong investment value and maintains the company's “buy” rating.
Risk warning: Increased competition in the e-commerce industry, user retention rates falling short of expectations, market regulatory risks, risk of core management changes.