Sealand Securities has released research reports stating that it maintains a "buy" rating on Alibaba-W (09988), considering the company's gradually recovering revenue growth, but still in the core business investment period, adjusting profit forecasts. It is expected that the company's revenue for FY2025-2027 will be 1010/1117.7/1231.4 billion yuan respectively, with net income attributable to the parent company of 101.9/123.8/143.3 billion yuan, and Non-GAAP net income of 158.2/172.4/196.8 billion yuan, with a target price of 118 Hong Kong dollars.

The main views of Zhonghai Securities are as follows:

Financial Indicators Outlook

The bank predicts that Alibaba's FY2025Q2 (corresponding to the 2024Q3) total revenue will reach 239.6 billion yuan (YoY +7%, QoQ -1%), adjusted EBITA year-on-year decrease by 7% to 39.8 billion yuan, with adjusted EBITA margin of 17%; Taohua Group is expected to generate revenue of 11.3 billion yuan (YoY +4%, QoQ -11%), with an adjusted EBITA margin of 44%; Alibaba International Digital Business Group is expected to generate revenue of 31.3 billion yuan (YoY +28%, QoQ +7%), with an adjusted EBITA margin of -11%; Cloud Intelligence Group is expected to generate revenue of 29.9 billion yuan (YoY +8%, QoQ +13%), with an adjusted EBITA margin of 8%.

Taotian Group: Taotian Group's GMV growth rate has slowed down slightly, with overall monetization rate stabilizing.

The bank expects Taotian Group's revenue in FY2025Q2 to increase by 4% to 101.3 billion yuan, with China's retail business revenue increasing by 3% to 95.5 billion yuan. The bank forecasts that Taotian Group's GMV growth rate in FY2025Q2 will slow down slightly compared to the previous quarter, mainly due to:

1) Consumption shows robust recovery. According to statistics from the National Bureau of Statistics, in the period of January to September 2024, the year-on-year growth rate of the total retail sales of consumer goods in China was 3.3%, and the year-on-year growth rate of online physical goods retail sales was 7.9%.

2) Taobao's increased basic software service fees of 1600 have caused some monetization-sensitive merchants to be squeezed. However, the overall monetization rate of Taohua Group is stabilized by the platform's overall promotional tools and the increase in Taobao's basic software service fees. The bank expects that customer management revenue (including commissions) will increase by 2% to 70 billion yuan in FY2025Q2. The platform maintains its investment in price competitiveness, consumer experience, and AI applications. The bank predicts a 6% year-on-year decrease in EBITA to 44.3 billion yuan in FY2025Q2, with an adjusted EBITA margin of 44% for Taohua Group.

Alibaba International Digital Business Group: International business across various platforms maintaining strong growth.

The bank expects that Alibaba Group's international digital business FY2025Q2 overall revenue will increase by 28% to 31.3 billion yuan, with 1) international retail businesses achieving revenue of 25.1 billion yuan (YoY +32%), mainly driven by the robust growth of various retail platforms under AIDC, where AliExpress benefits from strong growth in the AE Choice business; 2) international wholesale businesses achieving revenue of 6.2 billion yuan (YoY +12%), maintaining stable performance. Overall, the company continues to invest in cross-border business, but benefits from the continuous improvement of some UE models in the business, the loss level of the international business sector is expected to narrow month-on-month. The bank expects that FY2025Q2 Alibaba Group's international digital business adjusted EBITA will be -3.3 billion yuan, with adjusted EBITA margin of -11%.

Cloud Intelligence Group: AI-driven cloud revenue growth, strategically focusing on public cloud and profitability enhancement.

The bank forecasts that Cloud Intelligence Group's revenue in FY2025Q2 will increase by 8% to 29.9 billion yuan, mainly driven by price reductions in cloud products and revenue generation from AI products. The company strategically focuses on public cloud, while continuously improving revenue quality by reducing low-profit projects, partially offsetting the impact of price reductions in public cloud products. The bank expects the adjusted EBITA of Cloud Intelligence Group in FY2025Q2 to be 2.4 billion yuan, with an adjusted EBITA margin of 8%.

Risk Warning: Risks of policy regulation and valuation adjustment in the internet industry; intensified market competition resulting in lower-than-expected industry growth; excessive business diversification with insufficient organizational synergy; forward-looking performance forecasts are for reference only.