The forecast 4QFY24 revenue is in line with expectations, and non-GAAP net profit to mother is lower than the agreed forecast
We expect Alibaba's 4QFY24 (1Q24) revenue to increase 5% to 219.2 billion yuan, which is basically in line with consistent expectations; we expect adjusted EBITA to drop 4% year-on-year to 24.3 billion yuan, and non-GAAP net profit to mother of 28.1 billion yuan, mainly due to increased investment in core business and loss reduction falling short of market expectations.
Key points of interest
GMV is expected to increase year-on-year growth, and customer management revenue exceeds expectations. We expect 4QFY24's domestic retail GMV to increase by 6%. Mainly due to the company's strategic direction of establishing “scale and market share as the primary goal” and the good performance of online consumption since the beginning of the year, the year-on-year growth rate of Alibaba's GMV has gradually caught up with the year-on-year growth rate of online retail sales. We expect 4QFY24 customer management revenue (CMR) to increase by 3.5% year on year. The slight decline in monetization rate is mainly due to Taobao GMV, which has a low monetization rate, growing faster than Tmall. With the launch of new advertising products, the monetization rate is expected to gradually stabilize. We expect FY25 CMR to increase 2.5% year over year.
Overseas and Cainiao investments have increased significantly, and cloud computing is still in a period of adjustment. We expect 4QFY24 international digital business revenue to increase 35% to 25.5 billion yuan, and EBITA loss to 4.2 billion yuan, mainly due to AE Choice investment, FY25 we expect a loss of 17.2 billion yuan, of which the increase in AE Choice loss was partially offset by Lazada's loss reduction; we expect Cainiao EBITA loss of 9.3 billion yuan this quarter, mainly due to additional employee incentives and increased investment in overseas infrastructure after the cancellation of the listing. We believe that in the context of expanding overseas with an asset-heavy model, the faster revenue growth for Ali Relying on a significant increase in investment, the efficiency of investment remains to be seen. We predict that 4QFY24 cloud computing revenue will also increase 4% to 25.7 billion yuan. Ali will continue to focus on public clouds and drive usage growth with price cuts, which is expected to drive a gradual recovery in revenue, and FY25 revenue is expected to increase by 5.8% to 112.7 billion yuan.
Increased investment and loss falls short of expectations. 4QFY24 and Group EBITA are both expected to decline year on year. We expect 4QFY24 Taotian Group's EBITA to drop 4% year on year to 37.6 billion yuan. The company plans to invest incremental revenue in exchange for growth. We expect FY25 Taotian Group EBITA to be 190.9 billion yuan. We expect 4QFY24 Alibaba EBITA to decline 4% year-on-year to 24.3 billion yuan, mainly due to increased investment in domestic and overseas core businesses, and losses in local lifestyle, digital entertainment and other businesses falling short of market expectations.
Profit forecasting and valuation
Currently, the company's US and Hong Kong stocks are trading 8/7 times the non-GAAP price-earnings ratio for the 2024/2025 fiscal year. We kept our revenue and profit forecasts for fiscal year 2024 unchanged, and lowered our revenue forecasts by 2% and 2% for the 2025 and 2026 fiscal years to 10,034 billion yuan and 10,790 billion yuan, mainly due to non-core business revenue falling short of our expectations; cutting non-GAAP net profit of 8% and 13% for the 2025 and 2026 fiscal years to $154.8 billion and $171.3 billion, mainly due to increased investment and new business losses falling short of our expectations. We maintain target prices of $112 and HK$109 for US stocks and Hong Kong stocks, corresponding to the 2024/2025 non-general accounting price-earnings ratio of 12/12 times, with room for growth of 56% and 55%, respectively.
risks
The macroeconomy and consumption are weak; e-commerce competition is intensifying.