Short-term core e-commerce increased investment in exchange for growth, increased emphasis on shareholder returns, maintained a “buy” rating, increased investment in the short term, and profit margins were under pressure. We lowered the FY 2025-2026 adjusted net profit forecast to 1548/1707 billion yuan (previous value 1767/1999 billion yuan), and added the FY2027 adjusted net profit forecast of 189.1 billion yuan. The corresponding year-on-year growth rate for FY2025-2027 was -1.7%/10.2%/10.8%, corresponding to the diluted EPS of 8.3/9.3/ 10.6 yuan, current stock price 82.65HKD corresponds to 9.2/8.2/7.2 times PE. In the future, the monetization rate of domestic e-commerce is expected to rise again as the number of users and transaction frequency increases, and Alibaba Cloud's layout adjustments for the AI era are expected to return to double-digit year-on-year growth. The company will pay more attention to shareholder returns. After subsequent dual listings, it is expected to be included in the improvement of the liquidity environment driven by Hong Kong Stock Connect and maintain a “buy” rating.
FY2024Q4 profit fell short of expectations, international business increased investment, Cainiao withdrew its listing application, FY2024Q4 revenue increased 7% year on year; non-GAAP net profit fell 11% year on year. By business, (1) Taotian Group: Revenue increased 4% year over year, online GMV and order volume increased by double digits year on year, and customer management revenue increased 5% year over year. The adjusted EBITA rate decreased by 2.1 pct year over year due to price competition and continued investment in infrastructure. (2) International Business Group: Revenue increased 45% 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 -14.9%, down 2.6 pct year on year. (3) Cainiao Group: Cross-border logistics driven growth, revenue increased 30% year on year, adjusted EBITA rate -5.5%. The year-on-year decline of 1.9 pct was mainly due to the withdrawal of the IPO and incentives granted to employees. (4) Cloud Intelligence Group: Revenue increased 3% year-on-year, double-digit revenue growth for core public cloud products, and three-digit growth of AI products accelerated year-on-year. The adjusted EBITA rate was 5.6%, an increase of 4 pcts year-on-year.
Priority is given to increasing investment in short-term e-commerce. It is expected to complete the dual major listing in Hong Kong, China in August 2024 (1) The Group's highest priority goal is to regain growth in e-commerce and cloud computing, increasing investment in the short term. FY2025H2 is expected to launch new commercial products to increase the monetization rate; (2) FY2024 has planned to return US$16.5 billion (about 8% of the current market value) to shareholders, of which approximately US$4 billion in cash dividends, the repurchase amount is US$12.5 billion, and tradable shares are reduced by 5.1%. The dual major listing in Hong Kong, China is expected to be completed in August 2024.
Risk warning: industry competition intensifies, macroeconomics falls short of expectations, organizational adjustments fall short of expectations, regulatory changes.