Matters:

Alibaba is about to release financial results for the fourth quarter of fiscal year 2024.

Guoxin Internet's opinion: 1) 4QFY24 revenue is expected to be +6% year-on-year, and the adjusted EBITA profit margin is 11%: Looking at revenue, we expect Alibaba to achieve revenue of 260.3 billion yuan this quarter, +6% year-on-year, and a 2-year CAGR of about 4%. We expect the revenue growth rate for this quarter to be basically the same year on year. The revenue growth rate for Taotian/ International Digital Commerce/Local Life/Cainiao/ Cloud Intelligence is expected to be 2%/35%/13%/21%/4%, respectively. In terms of profit, it is estimated that 4QFY24's adjusted EBITA profit margin was 11%, down 0.9 pct year on year, and the non-GAAP net interest rate was 12%, down 1.6 pct year on year. We expect that the Group's adjusted EBITA profit margin is mainly due to increased investment in Taotian, International Digital Commerce, and Gaode businesses, a year-on-year decline in profit margins, and a total of about 1 billion yuan in one-time bonus expenses granted to employees after Cainiao suspended its listing, all of which were included in the March quarter. 2) Maintaining the purchase rating: Ali continued to invest in core business after restructuring, reducing costs and increasing efficiency in non-core businesses. After the restructuring, Ali continued to invest in core business, reducing costs and increasing efficiency in non-core businesses. Currently, the company's stock price corresponds to FY2025 8 times PE. We slightly adjusted the company's FY2024-FY2026 revenue forecast to 9390/10141/1093.3 billion yuan, with an adjustment of -0.4%/-0.4%/-0.4%, which mainly reflects the continued contraction of non-core businesses such as Taotian's own operation and Dawen Entertainment; we slightly adjusted the company's FY2024-FY2026 net profit forecast to 1584/1631/186.6 billion yuan, mainly to reflect -0.8%/-0.2%/-0.2% Continued investment in core businesses such as Taotian. We maintain the company's target price of HK$95-103, 35%/46% from the current increase, and maintain a “buy” rating.

Commentary:

Overall: We expect 4QFY24 revenue +6% year over year, adjusted EBITA profit margin of 11% 4QFY24. We expect Alibaba to achieve revenue of 260.3 billion yuan, +6% YoY, and a 2-year CAGR of about 4%. We expect the revenue growth rate for this quarter to be basically the same year on year. The revenue growth rate for Taotian/ International Digital Commerce/Local Life/Cainiao/ Cloud Intelligence is expected to be 2%/35%/13%/21%/4%, respectively.

The 4QFY24 adjusted EBITA margin was 11%, down 0.9 pct year on year, and the non-GAAP net profit margin was 12%, down 1.6 pct year on year. We expect that the Group's adjusted EBITA profit margin is mainly due to increased investment in Taotian e-commerce, international digital commerce, and Gaode businesses, a year-on-year increase in loss rates, and a total of about 1 billion yuan in one-time bonus expenses given to employees after Cainiao suspended its listing, all of which were included in the March quarter.

Taotian Group: GMV is expected to be +6% YoY and CMR revenue +3% YoY this quarter. The increase in Taobao's GMV share affects the CMR growth rate and is expected to increase the CMR growth rate of Taobao Group this quarter

International digital commerce: Revenue is expected to be +45% year-on-year, and the adjusted EBITA profit margin is -17%. Business investment will continue to increase. It is estimated that Ali's international business revenue this quarter was 20.7 billion yuan, +45% year over year. The adjusted EBITA profit margin was -17%, down 5 pcts from the same period last year, increasing business investment. The company will continue to invest in Choice and Trendyol businesses.

Investment advice: Maintaining a “buy” rating

After the restructuring, Ali continued to invest in core business, reducing costs and increasing efficiency in non-core businesses. Currently, the company's stock price corresponds to FY2025 8 times PE. We slightly adjusted the company's FY2024-FY2026 revenue forecast to 9390/10141/1093.3 billion yuan, with an adjustment of -0.4%/-0.4%/-0.4%, which mainly reflects the continued contraction of non-core businesses such as Taotian's own operation and Dawen Entertainment; we slightly adjusted the company's FY2024-FY2026 net profit forecast to 1584/1631/186.6 billion yuan, mainly reflected in the margin of -0.8%/-0.2%/-0.2% Tiandeng continues to invest in core businesses. We maintain the company's target price of HK$95-103, 35%/46% from the current increase, and maintain a “buy” rating.

Risk warning

Policy risks, market risks such as increased competition for new entrants, macroeconomic systemic risks, etc.