Core views:
Forecast of main financial indicators: We expect Alibaba's FY2024Q4 (corresponding to the natural year 2024Q1) to achieve total revenue of 219.8 billion yuan (YoY +6%, QoQ -16%), the adjusted EBITA margin decreased 2% year over year to 24.8 billion yuan, and the adjusted EBITA margin was 11%; of these, Taotian Group's estimated revenue of 94 billion yuan (YoY +5%, QoQ -27%), and Taotian Group's adjusted EBITA margin was 40%; Alibaba International Digital Business Group's estimated revenue of 25.9 billion yuan ( YoY +37%, QoQ -9%), Alibaba International Digital Business Group adjusted EbitaMargin to -15%; Cloud Intelligence Group's estimated revenue of 25.6 billion yuan (YoY +4%, QoQ -9%), and Cloud Intelligence Group adjusted EBITA margin of 5%.
Taotian Group: The low price strategy is beginning to bear fruit, and Taotian Group's GMV growth rate has been restored. We expect FY2024Q4 Taotian Group's revenue to increase 5% year on year to 94 billion yuan, of which FY2024Q4 China's retail business revenue increased 4.3% year on year to 90 billion yuan, mainly due to 1) According to data from the National Bureau of Statistics, total retail sales of social consumer goods in the country increased 5.5% year on year in January to January, and 14.4% year on year. Thanks to good online consumption performance and the continuous advancement of the platform's low price strategy, we expect FY2024Q4 Taotian GMV to increase 6.5% year on year The gap with the growth rate of online retail sales of physical products is gradually narrowing; 2) Considering that Taobao's GMV share has had a certain impact on the overall monetization rate, we expect FY2024Q4 customer management revenue (including commissions) to increase 3.5% year-on-year to 66.1 billion yuan. At the same time, the platform continues to increase investment in price power, consumer experience, and AI applications. We expect FY2024Q4 Taotian Group's adjusted EBITA to be 38 billion yuan, and adjusted EbitaMargin to 40%.
Ali International Digital Business Group: The business of various international business platforms has maintained strong growth. We expect the overall revenue of Ali International Digital Business Group FY2024Q4 to increase 37% year-on-year to 25.9 billion yuan, of which 1) international retail business achieved revenue of 22.1 billion yuan (YoY +46%), mainly driven by strong growth in AIDC's retail platforms. Among them, AliExpress benefited from strong growth in AChoice business. In January 2024, Choice orders accounted for 50% of AliExpress's total orders, and order volume continued to grow rapidly; Trendyol's e-commerce business is expected to maintain steady growth and is being maintained While leading the Turkish market, it continues to expand in the Middle East; 2) The international wholesale business achieved revenue of 4.9 billion yuan (YoY +7%) and continued to be stable.
Overall, while the company's international business revenue is growing at a high rate, increasing investment in cross-border business may drive the loss margin of the international business sector to increase. We expect FY2024Q4 Alibaba International Digital Business Group's adjusted EBITA to be -40 billion yuan, and the adjusted EBITA margin will be -15%.
Cloud Intelligence Group: Revenue continues to be under pressure, and the strategy focuses on public clouds and improving profitability. We expect FY2024Q4 Cloud Intelligence Group's revenue to increase 4% year-on-year to 25.6 billion yuan, mainly due to reduced cloud product prices and AI technology innovation, and the benefits brought about by AI technology innovation will take some time to be reflected. The company's strategy focuses on public clouds, and at the same time continues to improve revenue quality by reducing low-profit margin projects. Thanks to project structure optimization, we expect FY2024Q4 Cloud Intelligence Group's adjusted EBITA to be 1.2 billion yuan, and the adjusted EBITA margin will increase to 5% year-on-year.
Profit forecast and investment rating: Considering organizational changes and strategic adjustments, the revenue growth rate will gradually recover, but the company will still increase investment in the core business. We have adjusted the profit forecast. We expect the company's FY2024-2026 fiscal year revenue to be 9391/9,983/10,801 billion yuan, respectively, 936/1075/122.7 billion yuan, the corresponding diluted EPS is 4.43/5.09/5.81 yuan, and the corresponding P/E is 15x/13x/11x; according to the SOTP valuation method, We gave Alibaba a total target market value of 1,987.2 billion yuan for fiscal year 2025, corresponding to a target price of 98 yuan/HK$106, maintaining a “buy” rating.
Risk warning: Macroeconomic growth falls short of expectations; risk of policy supervision and valuation adjustments in the Internet industry; increased market competition; industry growth falls short of expectations; excessive diversification of business and insufficient organizational coordination; forward-looking performance forecasts are for reference only.