Daiwa's report states that alibaba-W (09988.HK) is a target for investing in the china mainland consumer market, but its stock price has underperformed the market, with a cumulative increase of 35% in the past 30 days, while during the same period, the CSI China Mainland Internet ETF increased by 40.4%. The bank expects the Chinese government to clearly state its goal of 'preventing further decline in house prices,' focusing on promoting the recovery of the property market, which will bring wealth effects and boost consumer sentiment. In this regard, shanghai is distributing 0.5 billion RMB in consumer vouchers and raising the interest rates on existing home loans, which is expected to have a positive impact on the chinese consumption market. However, until detailed financial stimulus measures are announced by the chinese government (note: tomorrow (the 8th), various ministries including the National Development and Reform Commission will hold a press conference to announce), the short-term stimulus is expected to be limited.

The bank stated that after a recent increase in alibaba's stock price, its forecasted forward PE growth rate for the next year is 0.7 standard deviations higher than the three-year average, but still 0.5 standard deviations lower than the five-year average. The bank believes that alibaba still has significant room for valuation reevaluation, with its current valuation equivalent to a forecasted PE ratio of 12.6 times, lower than the five-year average of 15.6 times. Even though the revenue growth rate for the fiscal years 2025 to 2026 is expected to be slower than in 2022, the bank believes that alibaba's market valuation will stabilize in fiscal year 2025 and will more proactively release shareholder value compared to two to three years ago.

Additionally, Daiwa mentions that the company is intensifying efforts to monetize core customer relationship management (CMR) through new advertising products and software service fees, narrowing the gap between CMR and gross merchandise value (GMV) on the platform, and driving profit margins upward. If the mainland financial stimulus takes effect starting in 2025, alibaba's profit forecast for the fiscal year ending in March 2026 is expected to have room for growth. Daiwa raised alibaba's listed in hong kong target price from 98 RMB to 146 RMB, rating it as a 'buy'.