Company news

The company's recent situation

Recently, Ali has taken a series of measures to protect the rights and interests of merchants and reduce merchant thresholds and operating costs.

reviews

We believe that Ali's “user-centered” strategy does not mean abandoning merchants. The main players that provide users with good products, good prices, and good experiences are still merchants. The platform needs to balance consumer experience and merchant operations: 1) reduce the merchant's operating threshold and operating costs, 2) set merchant rules and reward and punishment mechanisms around platform positioning, and 3) introduce new volume to merchants.

Loosening only refunds, and launched Refund Vault to reduce the cost of returns and refunds for merchants. Taobao launched the store experience system in July '24, and the platform stopped actively intervening after only refunds occurred; in September '24, Taobao launched “Refund Bao” to help merchants reduce return and shipping costs. Since 24 years, refunds and returns have increased significantly in the proportion of merchant operating costs. We believe that Ali has effectively reduced merchant operating costs on the basis of guaranteeing user experience through methods such as user credit points, merchant experience points, and process optimization, which is conducive to opening up the platform's long-term monetization rate space and building a healthy merchant ecosystem.

Experience points are used to replace the DSR rating system, and connecting to WeChat Pay brings new volume to merchants and encourages merchants to serve users well. In the traditional DSR evaluation system, there is no objective measurement of the merchant's service capability. When the new experience subsystem becomes a part of traffic distribution, it can not only positively motivate merchants, but also give merchants a standardized set of service reference standards to encourage merchants to serve users well. Furthermore, according to QM data, there are more than 80 million high-frequency e-commerce users among WeChat's exclusive users. We judge that this customer base, which is dominated by the elderly and the elderly, is expected to increase Taobao's long-term user base, and merchants may benefit from this.

We believe that although the overall competition of e-commerce platforms is quite homogenous, and leading companies in the industry also have aspects worth learning from, this does not necessarily mean that they should abandon their foundations and follow suit completely. From following up with only refunds, Ali discovered many problems in its own operations and made up for it with its own strengths, reflecting the company's modesty and pragmatism. Ali's original business was centered around stores, and in future competition, it will still seek balanced development based on its own differentiated advantages and advanced experience in the industry.

Profit forecasting and valuation

Currently, the company's US and Hong Kong stocks are trading 10/8 times the non-GAAP price-earnings ratio for the 25/26 fiscal year.

We kept our revenue and EBITA forecasts unchanged and raised Alibaba's FY25 non-GAAP net profit of 3% to 160.5 billion yuan, mainly due to the decline in the base effect of one-time expenses in the same period last year. Recently, Ali's trend has lagged behind the sector. We believe that on the one hand, it is a decline after a large increase at the end of September, and on the other hand, because Ali's investment logic is different from some companies that have been fully verified in the competitive landscape, but because the e-commerce business is recovering steadily, it is necessary to follow the continuous verification of fundamentals to push the logic to a new stage. Maintaining the target prices of US stocks and Hong Kong stocks of HK$112 and HK$109 based on SOTP, corresponding to the 2025/2026 non-GAAP price-earnings ratio, was 11/9 times, with room for growth of 16% and 16%, respectively.

risks

The macroeconomy and consumption are weak; e-commerce competition is intensifying.