FY4Q24 revenue exceeded market expectations, and Taotian's investment paid off; profits fell short of market expectations, mainly due to increased investment from Taotian, international commerce, and Cainiao, etc., putting pressure on the profit side. With FY4Q2024, the company achieved operating revenue of 221.9 billion yuan (+6.6%), Bloomberg agreed to expect 219.8 billion yuan; achieved adjusted net profit of 24.4 billion yuan (-10.8%), and Bloomberg agreed to 25.6 billion yuan.
We believe that Ali will return to focusing on GMV growth+ market share, and pay more attention to users+services. Subsequent improvements in GMV and efficiency will be an important focus; overall returns such as company profitability & dividend repurchases will continue to improve, and Hong Kong's dual listing can also increase liquidity. See for details:
Taotian Group: The investment paid off, GMV grew by double digits, and CMR exceeded market expectations. With FY4Q2024, Taotian Group achieved revenue of 93.2 billion yuan (+4%), and adjusted EBITA of 38.5 billion yuan (yoy = -1.4%, profit margin 41.3%, -2.1pct). 1) GMV and orders: double-digit growth. 2) CMR: The company achieved CMR revenue of 63.8 billion yuan (+5%) this quarter, with Bloomberg's consensus forecast of 61.5 billion yuan, mainly due to double-digit growth in online GMV; the conversion rate declined, mainly due to the increase in online GMV of Taobao merchants and the introduction of a new model with a lower monetization rate. 3) Membership: 88VIP membership grew by double digits over the same period last year, exceeding 35 million. 4) Outlook: We believe that FY25 is expected to grow steadily throughout the year, and the gap between GMV and CMR growth rates is expected to narrow with the launch of the new advertising tool “All Site Push”.
Cloud Intelligence Group: Profitability continues to improve. FY4Q2024, Cloud Intelligence Group achieved revenue of 25.6 billion yuan (+3%), and adjusted EBITA of 1.4 billion yuan (yoy = 45%, profit margin 5.6%, +1.6 pct). 1) Strategy: Focus on high-quality revenue brought about by increased public cloud adoption and reduce project-based contract revenue with low profit margins. 2) Core public cloud business: double-digit year-on-year revenue growth. 3) AI-related revenue: Growth accelerated, with a three-digit year-on-year increase. 4) Outlook: We believe FY25H2 revenue is expected to resume double-digit growth as the cloud business is gradually adjusted.
International business: The revenue side has maintained rapid growth, and losses due to increased investment have increased. FY4Q2024, Alibaba Digital Commerce achieved revenue of 27.4 billion yuan (yoy +45%), adjusted EBITA of -4.1 billion yuan (profit margin -14.9%, yoy-3.4pct), and overall orders increased 20% year-on-year, driven by strong growth across all AIDC retail platforms, especially AliExpress's cross-border business choice. 1) The international retail business achieved revenue of 22.3 billion yuan (+56%), by platform: a) AliExpress: Continued to achieve strong year-on-year order growth, mainly driven by Choice. In April 2024, Choice orders accounted for about 70% of AliExpress's total orders, and continued to grow rapidly. b) Trendyol: Achieved strong double-digit order growth. While maintaining the lead in Turkey, it expanded its cross-border business in the Gulf region with rich product categories and fast and reliable logistics services, and became one of the most downloaded e-commerce apps in the Gulf region. c) Lazada: Continuing to focus on improving operational efficiency. As the monetization rate was further improved and operations were optimized, losses per order continued to narrow year-on-year in the current quarter. 2) The international wholesale business achieved revenue of 5.17 billion yuan (+11%).
Cainiao: AliExpress's cross-border logistics fulfillment services drive revenue growth. FY4Q2024 Cainiao achieved revenue of 24.6 billion yuan (yoy +30%), and adjusted EBITA was -1.3 billion yuan. Cainiao and AliExpress collaborated this quarter to add priority products to cover 4 countries, covering a total of 14 countries.
Local life: Is income hungry? Driven by healthy growth and Gaode's rapid growth. FY4Q2024 achieved revenue of 14.6 billion yuan (yoy +19%), and adjusted EBITA was -3.2 billion yuan. Thanks to the increase in transaction users and purchase frequency this quarter, the number of Hungry orders increased strongly year-on-year, and large travel scenarios and destination services led to rapid growth in Gaode's business.
Big Entertainment: The decline in Youku's revenue affects revenue. FY4Q2024 Entertainment achieved revenue of 4.9 billion yuan (yoy -1%), and adjusted EBITA was -8.8 billion yuan. Youku's revenue declined slightly this quarter, Alibaba Pictures' movie business revenue increased, and Damai's revenue grew rapidly.
Continue to promote repurchases+dividends, and focus on the dual major listing in Hong Kong in August. 1) Buyback: FY4Q24 bought back $4.8 billion ($12.5 billion for the entire fiscal year). 2) Dividends: Approval of FY24 billion dollars in dividends for FY4 billion.
3) Dual major listing in Hong Kong: The conversion is expected to be completed by the end of August.
We adjusted the company's revenue forecast for FY2025-2027 to 10338/11285/1226.8 billion yuan (the original FY25-26 forecast was 10,222/1096 billion yuan), and the adjusted net profit was 1523/1738/1975 billion yuan (the original FY25-26 forecast was 1572/1702 billion yuan). PE estimates the company's market value of $1675 billion, corresponding to a value of HK$95.06 per share (RMB 1.10 to HKD exchange rate), maintaining a “buy” rating.
Risk warning: industry competition intensifies, industry supervision is getting stricter