Zhitong Finance learned from GTJA's research report that it maintains an "increased holdings" rating for Alibaba-SW (09988), and slightly adjusts the company's FY2025E-FY2027E revenue to 1017/1100.8/1168.9 billion yuan, and the adjusted net income is 152/169/180.4 billion yuan, the FY2025 target price is HKD94. The company continues to increase shareholder returns, and the Hong Kong dual primary listing may be included in the Hong Kong Stock Connect as soon as September.
GTJA's main opinions include:
The difference between CMR and GMV growth rates may further narrow, waiting for the inflection point of monetization rate.
The bank predicts that the YoY growth rate of Taotian's GMV in FY25Q1 will be +5.5%, mainly driven by double-digit growth in GMV during the 618 promotion period. Full-site promotion will become an important tool to improve the monetization rate. During 618 period, 130 first-batch internal test merchants used Alibaba Mama's full-site promotion to achieve transactions exceeding 10 million. Over 1.5 million commodities increased by over 65% on average in terms of GMV after seven days of promotion on the whole site, and over 300 SKUs achieved transactions exceeding one million. The bank predicts that the YoY growth rate of Taotian's CMR revenue in FY25Q1 will be +3%, and there is still a difference in growth rate with GMV. With the iteration of the whole-site promotion algorithm and the expansion of the coverage range of merchants, the monetization rate may have an inflection point, and the difference in CMR revenue and GMV growth rate may further shrink.
The quarterly repurchase in June hit a new high, and there may be a catalyst for inclusion in the Hong Kong Stock Connect in the future.
The company continues to increase shareholder returns, and in the quarter of June, it invested a total of $5.8 billion (historical high) to repurchase 0.613 billion ordinary shares (approximately 77 million ADS). The previous quarterly repurchase amount was $4.8 billion. Currently, the company still has a repurchase quota of $26.1 billion (valid until March 2027). According to Alibaba's official announcement, it continues to promote dual primary listing in Hong Kong and is expected to complete the conversion by the end of August 2024. If the conversion is completed on time, it can catch up with the time window for the scheduled adjustment of the Hang Seng Composite Index in September. It may be included in the Hong Kong Stock Connect as soon as September.
International business may see improvement in monetization rate, and AI assists in improving cloud revenue quality.
The bank predicts that the company's revenue in FY25Q1 will be 252.1 billion yuan, a YoY increase of +8%, and an adjusted net income of 37.4 billion yuan and a net profit margin of 14.8%. Among them: 1) Taotian Group revenue increased by +3% YoY to 118.2 billion yuan; 2) International business revenue increased by +30% YoY to 28.9 billion yuan. In June, Tmall and Brazilian retailer Magalu reached cooperation, and both parties entered each other's markets. Alibaba will charge commission for Tmall products sold on Magalu's platform, and the monetization rate may improve. 3) Cloud Intelligence revenue increased by +5% YoY to 26.4 billion yuan. After the TDT series model was significantly reduced in price in May, many customers directly called the large models on Alibaba Cloud. The number of enterprise customers using the Bailian service increased from 0.09 million to 0.23 million in nearly two months.
Risk warning: increased industry competition; slow recovery of consumption; escalation of price wars in the e-commerce industry; progress and effects of reform are not as expected.