Performance Summary: Ali announced 24Q3 results, achieving revenue of 236.5 billion yuan, +5.2% yoy, slightly lower than Bloomberg's agreed estimate of 239.4 billion yuan, adjusted EBITA of 40.6 billion yuan, slightly lower than the agreed estimate of 40.9 billion yuan, and non-GAAP net profit of 36.4 billion yuan, in line with market expectations.

The growth gap between Taotian CMR and GMV narrowed, and the monetization rate stabilized.

1) Taotian Group achieved revenue of 99 billion yuan in 24Q3, yoy +1.4%, with an agreed expectation of 99.1 billion yuan. From a GMV perspective, Q3 online GMV growth was driven by a year-on-year double-digit increase in order volume. Order growth was mainly driven by an increase in purchase frequency, partly offset by a decrease in average order amount. We expect GMV to achieve medium to low single-digit growth. At the same time, due to Taotian's increase in technical service rates and a steady increase in the penetration rate of promotion tool merchants across the site, the gap between GMV and CMR has been effectively narrowed. The CMR for this quarter was 70.4 billion yuan, +2.5% yoy, which is basically in line with the agreed forecast of 70.9 billion yuan. The take-rate has gradually stabilized this quarter, and we estimate that the take-rate has remained flat this quarter.

2) We emphasized in our previous report that the current Taotian TR increase was not achieved overnight. It is affected by both positive and negative factors. Increased service rate increases and the penetration rate of global promotion merchants can play a positive driving role, but at the same time, the expansion of sales in innovative businesses with low commercialization rates will also structurally restrain TR growth. We think TR will experience a process of decline, stabilization, and recovery. After many quarters of continuous decline, TR has now basically stabilized. I am optimistic that the level of commercialization will gradually begin the process of improvement in due course in the next quarter.

3) Taotian achieved an adjusted EBITA of 44.6 billion yuan, slightly lower than expected, yoy -3.0%, mainly due to investment in user experience and technology under GMV's share priority strategy requirements.

Other segments, such as international digital commerce, cloud intelligence, and local living, performed well in profits.

1) International digital commerce: 24Q3 achieved international retail/international wholesale revenue of 25.6/6.1 billion yuan, yoy +35.0%/9.4%, with a consistent forecast of 25.5/5.8 billion yuan. The performance was strong. Cross-border business, especially AChoice, continued to play a driving role, and the decline in growth rate from month to month under a high base was in line with expectations. The EBITA side lost 2.9 billion this quarter, better than market expectations of 3.6 billion. Choice UE continued to improve month-on-month, and AliExpress and Trendyol continued to invest in European and overseas markets.

2) Cloud intelligence: 24Q3 achieved revenue of 29.6 billion yuan, yoy +7.1%, in line with market expectations. Revenue from public cloud products increased by double digits year on year, and AI products continued to grow by 3 digits year on year. We maintain Cloud Intelligence Group's judgment that FY25H2 revenue achieved double digit growth. Furthermore, Cloud Intelligence Group achieved an adjusted EBITA of 2.7 billion, exceeding market expectations of 2.2 billion. Currently, Alibaba Cloud occupies a leading position in the AI field, and expects subsequent AI to drive revenue and increase profit.

3) Local life: 24Q3 achieved revenue of 17.7 billion yuan, +13.9% yoy, market expectations of 19.3 billion yuan.

The EBITA loss reduction performance was impressive. The 24Q3 loss was 0.4 billion, better than the market forecast of 0.9 billion, mainly due to improved operational efficiency and expansion of business scale.

4) Cainiao: 24Q3 achieved revenue of 24.6 billion yuan, yoy +15.7%, lower than expected 27 billion yuan. Adjusted EBITA was 0.06 billion yuan, lower than expected 0.4 billion yuan.

5) Big Entertainment: 24Q3 achieved revenue of 5.7 billion yuan, -1.5% yoy, market expectations of 6 billion yuan, EBITA loss of 0.18 billion yuan, and market expectations of 0.17 billion yuan.

Taotian performed well in the Double Eleven promotion. In 24Q3, it bought back 4.1 billion US dollars, and steadfastly increased shareholder returns.

In '24, Double Eleven had an outstanding performance. The turnover of 589 brands in the full cycle exceeded 100 million, +46.5% yoy, setting a new historical record. The growth rate of beauty, 3C digital, home appliances and home appliances transactions was the highest on the entire network. The number of orders placed by 88VIP members increased by more than 50% year-on-year, and the number of members maintained double-digit growth. Taobao's live streaming sold over 100 million live broadcast rooms, a record high. Of these, 49 live streaming rooms that broke 100 million had a year-on-year growth rate of more than 100%. Taobao Live achieved significant year-on-year growth in overall transaction value and number of purchasing users. According to Yigan's analysis, Taotian's turnover for the full cycle of Double Eleven in '24 was +10.2% yoy.

In addition, Ali bought back 4.1 billion US dollars of shares this quarter, and the number of shares in circulation was further reduced by 2.1% compared to 24Q2, achieving better returns for shareholders. As of the end of the third quarter, there was still a repurchase amount of $22 billion under the share repurchase plan, which is valid until March 2027.

Profit forecast: We expect the company's revenue for the 2025/2026/2027 fiscal year to be 1004.3/1099.8/1195.3 billion yuan, respectively, and adjusted net profit to mother of 153.9/166.8/181.4 billion yuan. We used the SOTP valuation method to give Alibaba Group 8x PE, International Digital Business Group 1x PS, Cloud Intelligence Group 2x PS, Cainiao Group 1x PS, Local Life Group 0.5x PS, Dafeng Entertainment Group and all others, corresponding to a target price of HK$118 per share. We maintain our overall judgment on the company and maintain a “recommended” rating.

Risk warning: macroeconomic risk, industry competition risk, overseas business development risk, organizational structure reform risk, technology development risk, policy risk.