The FY2024Q4 Taotian GMV growth rate maintains healthy and positive growth. We expect the company's FY2024Q4 revenue to grow by about 6.4% year on year, CMR to increase by about 2% year on year, and non-gaap net profit by -4.2% year on year. The company focuses on the main e-commerce business, continues to promote strategies to increase user investment and promote low prices, is optimistic about the long-term growth resilience of the main e-commerce industry and the growth space for international business and cloud business, and maintains a “highly recommended” rating.
Taotian Group: GMV is growing healthily over year, increasing user investment to promote a low price strategy. FY2024Q4 Taotian continues to focus on growth, improving the user experience by strengthening promotions and app revisions. At the same time, the platform continues to implement a low price strategy. For example, in March 1688, the full entry plan was launched, bringing one million source vendors into Taobao in a semi-hosting format to greatly increase the supply of low-priced products; shopping experience optimization+low prices drive an increase in user frequency, and GMV is growing steadily. The gap between Taotian GMV and the National Bureau of Statistics (+14.4% year-on-year) narrows month-on-month compared to Q4. It is expected that Q1 GMV will remain the same as Q4. There is positive growth compared to health; in terms of revenue, Taobao's share of GMV increased further year on year under the low price strategy, and the monetization rate declined year on year. We expect the FY24Q4 CMR to grow at a rate of about 2% year over year.
In terms of profit, Taotian increased its user-side investment starting this quarter to seek growth. FY24Q4 Taotian Group is expected to adjust its EBITA to -2% year-on-year, and investment is expected to increase further in subsequent quarters.
International digital commerce: Cross-border e-commerce maintained high growth, and losses increased year-on-year. Cross-border businesses such as FY2024Q4 AliExpress and Trendyol maintained high growth. As of January 2024, the number of Choice orders accounted for about half of AliExpress's total order volume, and continued to contribute to the high growth rate of international business. We expect FY24Q4 international business revenue to grow at a rate of about 37% year on year; in terms of profit, along with the rapid growth of the platform, the Group increased its investment in international business resources for site development and marketing promotion, and sector losses are expected to increase year over year.
Furthermore, in terms of business risk, AE Choice focuses on the European, Middle Eastern and Asian markets, with little investment in the US region. It is expected that international business will be limited by overseas political risks.
Cloud Intelligence Group: Reducing the price of cloud products to expand the customer base. FY24Q4 Alibaba Cloud's low-profit project-based contracts continue to affect revenue growth. At the same time, at the end of February and the beginning of April, Alibaba Cloud announced an average price reduction of more than 20% for all domestic cloud products and a 23% average price reduction for all overseas products, thereby further attracting more customers to the cloud. We expect FY24Q4 cloud computing revenue to be +2% year-on-year, and the EBITA margin will be about 5%.
Investment advice: In the long run, Alibaba's e-commerce main business value is stable and growth is still resilient. International commerce and cloud computing have great potential for growth. FY2024-2026's non-GAAP net profit is estimated to be RMB 1593/1518/168.4 billion, respectively, giving FY2024 non-GAAP net profit 10 times PE, corresponding to a target price of HK$80.85, maintaining a “highly recommended” rating.
Risk warning: macroeconomic risks; increased competition in the industry.