Since this year, Alibaba's internal rationalization and strategic focus on “putting users first” and increasing investment in core businesses have highlighted results, and its market share has gradually stabilized. The core of this report focuses on discussions on the sources of growth and future development trends of Alibaba's e-commerce restart. We believe that organizational and user-first strategic adjustments will fundamentally drive the recovery of the main business. Looking ahead to the future growth of the platform, the slowdown in the growth rate of live streaming e-commerce and the slowing down of low price competition will bring about an improvement in the pattern. Over the long term, Taobao and Tmall's sufficient product supply and strong brand resources and strong genuine product guarantee will continue to support steady growth. It is expected that by 2026, Alibaba's growth rate will remain the same as the e-commerce industry, and its market share will continue to stabilize; in terms of monetization, it is expected that the entire site will continue to stabilize. Improving the monetization rate will be electricity The increase in merchant revenue and profit contribution. Furthermore, the company continues to issue high shareholder returns, and the FY2025 shareholder return is expected to reach 6.2-8.1% or higher. We are optimistic about the resilience of Alibaba's e-commerce growth and long-term growth potential for international and cloud businesses, and we strongly recommend it.
The source of Taotian's recovery: organizational optimization, putting users first. Since FY2024, Alibaba has carried out organizational and management adjustments. Wu Yongming served as Group CEO and Chairman and CEO of Taotian Group and Cloud Intelligence Group to achieve internal rationalization. In terms of strategy, the company focused on the main business, emphasized the user first, and fundamentally driven Taotian's business back to healthy growth.
Taotian's growth outlook: increasing user investment and returning to healthy growth. Future industry pattern improvement+long-term competitiveness stabilizes, and Ali's share will continue to stabilize. Based on the user-first strategy, Taotian has increased user marketing, introduced a number of service optimization measures such as refund-only and upgraded the store experience rating system, and made efforts to increase the price power of the platform, increase member benefits, increase user stickiness and frequency, and improve the user experience to drive the platform to return to a healthy growth trend. Currently, its market share has gradually stabilized. Looking ahead to Taotian's future growth, watching the slow growth rate of e-commerce live streaming and slowing down competition at low prices will lead to an improvement in the industry pattern; in the long term, there is plenty of room for e-commerce penetration, and Taobao Tmall's core competitiveness with sufficient product supply and rich brand resources and strong genuine product guarantee is stable to support long-term steady growth. It is expected that by 2026, Ali's growth rate will remain at the same level as the e-commerce industry, and its market share will continue to stabilize.
Monetization: Competition among merchants intensifies and platform bargaining increases. Site-wide promotion is expected to increase the monetization rate and contribute to e-commerce revenue and profit growth. In terms of commercialization, from a macro perspective, competition on the merchant side is intensifying, gradually accepting lower ROI, and there is plenty of room to increase the platform's monetization rate; judging from the platform's commercialization strategy, Alibaba has launched new sitewide promotion tools and increased the proportion of paid traffic. According to merchant research and feedback, the usage penetration rate is gradually increasing. It is expected that the platform's monetization rate will increase in the future. Additional advertising revenue will offset the investment of platform users to a certain extent and contribute to e-commerce revenue profits.
High shareholder returns, highly recommended. Since FY2024, the company has increased repurchases and dividends. FY2024 shareholder return (dividends & dividends/FY2024 year-end market value) is about 9%. According to estimates, FY2025 is expected to achieve a shareholder return of 6.2 to 8.1% or higher. We are optimistic about the growth resilience of Alibaba's e-commerce main business and the long-term growth potential of the international commercial and cloud business. Furthermore, the main listing in Hong Kong is about to be launched, and the valuation is still low. It is estimated that FY2025-2027 non-GAAP net profit is 151.6, 169.8, and 188.5 billion yuan. According to the overall valuation method, based on the overall valuation method, the company's FY2025 non-gaap net profit is 12 times PE, corresponding to the target price of HK$101.
Risk Alerts: Macroeconomic Risks, Increased Industry Competition, Technological Development Failing to Expectations, Overseas Policy Risks