Performance outlook: We expect FY25Q1 Alibaba's revenue to be 248.8 billion yuan, yoy up 6.2%; the company expects adjusted EBITA 40.5 billion yuan, yoy -10.8%, and EBITA margin 16.3%; expected non-GAAP net profit of 42.1 billion yuan, yoy -6%.
Taotian Group: The entire site is promoted and launched, and the GMV and monetization rate are expected to increase. We expect Fy25q1 Taotian Group's revenue YoY +2.8%. CY24Q2 Overall consumer retail consumption continued to recover. Total retail sales of social consumer goods changed 2.3%/3.7%/2.0% year over year in April/May/June; total retail sales of online physical goods changed -0.3%/0.3%/-10.0% year over year in April/May/June. The 618 promotion achieved good results. 365 brands sold over 100 million on Tmall 618, doubling the sales volume of more than 36,000 brands; Taobao's 10 billion subsidy transaction amount increased 550% year on year; 1.9 million Taobao's small and medium-sized merchants increased by more than 100% year on year. On April 16, Ali Mama released full-site promotion to open up a two-way channel between paid and organic traffic. We believe that full-site promotion is expected to become a key engine for Taoxian's new flywheel of growth, help all types of merchants stimulate new growth potential, and is expected to drive overall GMV growth and increase the monetization rate.
Cloud: Big model prices have been reduced, and AI applications have been implemented in many fields. We expect FY25Q1 cloud business revenue yoy +4.8%. On May 21, Alibaba Cloud announced a drastic price reduction for its nine generalized commercialization and open source series models. The input price of Tongyi Qianwen GPT-4 main model Qwen-Long API dropped from 0.02 yuan/thousand tokens to 0.0005 yuan/thousand tokens. By the end of May, the Tongyi Big Model had been applied in the fields of automobiles, aviation, mining, education, medical care, catering, games, cultural tourism, etc., through Alibaba Cloud service companies exceeding 0.09 million and more than 2.2 million through DingTalk service companies.
International e-commerce: AliExpress has reached a partnership with Magalu, and the monetization rate is expected to increase. We expect FY25Q1 international commercial revenue yoy +34.7%. On May 20, Alibaba invested 0.23 billion US dollars into Lazada. We believe this capital injection may further strengthen Lazada's competitiveness in the Southeast Asian e-commerce market. On June 25, AliExpress reached a partnership with Brazilian retailer Magalu. The two platforms are expected to significantly expand their product supply, and Ali will charge commissions for AliExpress products sold on Magalu. We believe cooperation may increase the monetization rate of international e-commerce.
Other business: We expect FY25Q1 local living income yoy +11.1%; Cainiao's income yoy +28.1%, and DME income yoy -5.0%.
The share repurchases continued, or the dual listing transition was completed in August '24. In the quarter ended June 30, 2024, Alibaba repurchased a total of 0.613 billion common shares for a total amount of 5.8 billion US dollars. The remaining amount of board authorization in the share repurchase plan is $26.1 billion, which is valid until March 2027.
Furthermore, in the FY24Q4 financial report, the company disclosed the progress of voluntary conversion to a dual major listing on the Hong Kong Stock Exchange, stating that it is preparing for the main listing in Hong Kong and is expected to complete the conversion investment proposal by the end of August 2024: Since 2023, Alibaba has continued to carry out organizational changes and continuous personnel and strategy adjustments, which have partially relieved the pressure brought about by fierce external market competition. Given the company's emphasis on continuing to increase investment to enhance competitiveness, we expect Alibaba's revenue for FY 2025-2027 to be 1024.9/1123.6/1219.3 billion yuan (previous value was 1019.6/1110/1212.3 billion yuan), an increase of 9%/10%/9% year over year; we forecast FY 2025-2027 non-GAAP net profit of 156.5/162.2/164.7 billion yuan (155.8/160.4/ 163.8 billion yuan), maintaining a “buy” rating.
Risk warning: macroeconomic downturn, repeated epidemics, weak consumption; policy and regulatory risks; increased competition in the e-commerce industry; new business development falls short of expectations