Key points of investment
Revenue and profit were basically in line with expectations, and the year-on-year profit growth rate declined: FY2024Q3 achieved revenue of 26.348 billion yuan, an increase of 5% over the previous year, and Bloomberg's agreed forecast was 261,247 billion yuan. After deducting the impact of non-GAAP net profit, the company's non-GAAP net profit was 47.951 billion yuan, down 4% year on year. Bloomberg's agreed forecast was 47.946 billion yuan, and revenue and profit were basically in line with expectations.
Taotian's profit margin remained high and stable, and the local lifestyle loss rate narrowed year-on-year: FY2024Q3 Taotian/ International Digital Commerce/Local Life/Cainiao/Ali)) The EBITA margins of the six major groups of Cloud Intelligence/Dawen Entertainment and other businesses were 46.43%/-13.64%/3.37%/8.42%/-10.26%/-6.75%, respectively. Local Life EBITA loss rate narrowed to -13.64% +8.18pct year over year? Taotian GMV grew healthily, increasing investment and regaining its leading position in the market: FY24Q3 Taotian's online GMV grew healthily year-on-year, and customer management revenue remained basically the same as the same period, benefiting from strong growth in the number of transaction buyers and orders. The number of merchants on the platform continued to achieve double-digit year-on-year growth in the current quarter. The number of 88VIP members exceeded 32 million, continuing to achieve year-on-year double-digit growth.
Under business adjustments, multiple groups operate steadily and firmly adhere to the two strategic cores of e-commerce and AI: FY24Q3 international digital commerce revenue exceeded expectations, and Choice led to rapid growth in cross-border business orders. Losses in the local lifestyle business continued to narrow, and Cainiao expanded global 5-day delivery coverage. The increase in revenue from Alibaba Cloud's public cloud products and services will drive profitability optimization. We expect organizational adjustments and AI empowerment to support steady growth and continue to strengthen its leading position in the industry.
The company increased the scale of repurchases, demonstrating firm confidence in the company's development: according to the company's financial report, in the natural year 2023, a total of 897.9 million shares of common stock (equivalent to 112 million American Depositary Shares) were repurchased at US$9.5 billion. The board of directors has approved an increase of $26 billion to the share repurchase program, which is valid until the end of March 2027. After the scale increase, there is still a share repurchase limit of US$35.3 billion over the next three fiscal years.
Profit forecast and investment rating: Based on the company's revenue and profit being slightly lower than expected, we lowered the company's EPS (non-GAAP) profit forecast for the 2024/2025/2026 fiscal year from 8.40/9.02/9.74 yuan to 7.51/8.03/8.85 yuan, and the corresponding PE (non-GAAP) is 8.49/7.94/7.21 (HKD/RMB = 0.92, 2024/02/13). The company continues to optimize the profitability of various businesses, and we believe that subsequent large-scale investment will help to deepen the moat. Taking into account the company's business growth, competitive advantages and barriers, we maintain the company's “buy” rating.
Risk warning: Alibaba's founder reduced his holdings, competition in the new retail business intensified, user retention rates fell short of expectations, regulatory risks such as e-commerce law and antitrust increased, and the head of Alibaba Cloud changed.