In the short term, Taotian Group adjusted profit margins or was under pressure. The company increased its repurchase efforts and maintained the “buy” rating. Considering Taotian Group's price competition and increased international commercial investment, we lowered the FY2024-2026 adjusted net profit forecast to 1643/1767/1999 billion yuan (previous value: 1653/1882/213.4 billion yuan), corresponding to a year-on-year growth rate of 16.2%/7.5%/13.1%, corresponding to diluted EPS of 8.4/9.3/10.7 yuan. The current stock price of 0.37 HKD corresponds to 7.6/6.9/ 5.9 times PE In the future, e-commerce and the cloud maintain investment and increase collaboration, and ROIC is expected to increase under various capitalization methods in non-core businesses as soon as possible. The company will expand the scale of repurchases, target no less than 3% of share capital cancellation every year for the next 3 years to increase the return rate, and maintain a “buy” rating.

FY2024Q3's performance was in line with expectations. Taotian and Cloud adjusted their strategies, and international business increased investment in FY2024Q3, revenue increased 5% year on year; non-GAAP net profit fell 4% year on year. By business, (1) Taotian Group: Revenue increased 2% year on year. In the context of price competition, the number of platform merchants increased by double digits year on year. The increase in the number of users and orders led to positive growth in GMV, but the average price of the single unit declined year on year. The adjusted eBITA rate decreased by 0.2 pct year-on-year, due to the increase in user traffic and content investment in Taobao apps. (2) International Business Group: Revenue increased 44% year on year, orders under the Choice full hosting model continued to grow rapidly, and increased investment in differentiated services led to increased losses. The adjusted EBITA rate was -11%, down 7.7 pct year on year. (3) Cainiao Group: Cross-border logistics driven growth, revenue increased by 24% year on year, and adjusted EBITA rate of 3.4%. (4) Local life: Revenue increased 13% year over year, and the adjusted EBITA rate narrowed to -13.6%, driven by improvements in UE and efficiency. (5) Cloud Intelligence Group: Revenue increased 3% year over year, focusing on public cloud products and efficiency improvements to drive the adjusted EBITA rate to reach 8.4%, up 3.8 pcts year over year.

Short-term core e-commerce investment or impact profit margins. In 2023, we promise to cancel the share capital of no less than 3% each year (1) The Group's highest priority goal is to regain growth in e-commerce and cloud computing. In the short term, investment in improving user experience will increase, and the increase in user acquisition and retention investment and traffic is skewed towards small and medium-sized businesses, the monetization rate and profit margin may be under pressure; (2) The total planned repurchase scale will be increased by US$25 billion to US$65 billion. In 2023, the number of tradable shares will be reduced by 3.3%.

Risk warning: industry competition intensifies, macroeconomics falls short of expectations, organizational adjustments fall short of expectations, regulatory changes.