The Zhitong Finance App learned that China Merchants Securities released a research report saying that Alibaba-W (09988) was officially included in Hong Kong Stock Connect yesterday. The bank continues to be optimistic about the company's improved competitive position, recovery in growth, profit growth, and attractive shareholder returns, and reaffirms the “increase in holdings” rating, with a target price of HK$123. The bank indicated that Alibaba was officially included in the Hong Kong Stock Connect yesterday after successfully completing the Hong Kong-US dual phase. The bank estimates that the inclusion of the Hong Kong Stock Connect may bring about a 10-15% increase in exchange momentum.

The bank pointed out that Alibaba has multiple drivers to help improve prospects. First, the company is shifting its business focus to GMV growth and the slowdown in the growth rate of the live e-commerce platform GMV. The bank believes this has led to a marginal improvement in its competitive position. Second, the bank also saw that thanks to Alibaba's consistent smooth operation between merchants and users, as well as recent commercial friction in the same industry, it has given it an opportunity for merchants to return.

Third, increased monetization rate: The bank expects that as advertising and commission rates improve, the increase in advertising and commission revenue will help close the gap between GMV and revenue growth rates. For example, the company recently began charging Taobao and Idle Fish sellers an additional 0.6% service fee for successful transaction orders. The bank expects Alibaba's customer management revenue (CMR) to return from low single-digit year-on-year growth in the first half of 2024 to high-single-digit year-on-year growth in the second half of this year. Fourth, losses in other sectors such as Cainiao, local lifestyle services, and international e-commerce continued to reduce losses, and management plans to achieve break-even within 24 months.