For the sale of all Gaoxin retail shares, the maximum amount to be collected was HK$13.138 billion incident: On December 31, 2024, Alibaba's subsidiary and New Retail signed an agreement with Dehong Capital to sell all shares held in Gaoxin Retail, which together accounted for about 78.7% of the total shares issued by Gaoxin Retail.

The total number of shares to be sold is 7.508 billion shares, of which 73.66% are held by Alibaba subsidiaries and 5.04% are held by New Retail.

Among them, New Retail is a company owned by the New Retail Strategic Opportunities Fund, L.P.

A wholly-owned investment company. Alibaba Group can exert a significant influence on New Retail's investment decisions, but New Retail is not accounted for as an Alibaba subsidiary, and Alibaba accounts for New RetailStrategic Opportunities Fund, L.P. investments using the equity method. Dehong Capital focuses on private equity investments and advocates a long-term sustainable policy.

According to the agreement, Alibaba's subsidiary and New Retail will be entitled to collect a maximum amount of approximately HK$13.138 billion for shares to be sold, which is equivalent to HK$1.75 per share for sale. Of this, the total amount receivable from Alibaba Group is approximately HK$12.298 billion, which will be used for business development and shareholder returns, etc. After the sale is completed, Alibaba Group will no longer hold any shares in Gaoxin Retail, which is estimated to result in losses attributable to shareholders of approximately RMB 13.177 billion.

Continue to focus on core business development and gradually monetize non-core businesses

Gaoxin Retail operates large stores, medium-sized supermarkets, and member stores under the “Da Runfa”, “Da Runfa Super”, and “M Member Store” brands. As of September 30, 2024, Gaoxin Retail had 466 large stores, 30 medium-sized supermarkets and six member stores, with a total construction area of about 13.49 million square meters; unaudited net assets were approximately RMB 21.798 billion. Alibaba invested approximately HK$22.4 billion in 2017 to hold 36.16% of Gaoxin Retail's shares through a wholly-owned subsidiary, then invested HK$28 billion in 2020 to increase its Gaoxin Retail holdings to 72%. According to Wind statistics, from 2017 to 2024, Gaoxin Retail's cumulative cash dividend was approximately HK$8.204 billion. Alibaba sold Gaoxin Retail with the intention of monetizing non-core assets. On December 17, 2024, Alibaba announced the sale of Yintai Department Store to Youngor for 7.4 billion yuan.

We believe Alibaba may continue to seek monetization of non-core assets to focus more on its core business.

Maintain profit forecasts and maintain “buy” ratings

The company's sale of Yintai Department Store and Gaoxin Retail may have a certain adverse impact on the company's investment income in the short term, but in the long run, it is beneficial to the healthy development of the company's core business. We maintain a forecast of 155.102/169.122/184.324 billion for the company's FY2025/FY2026/FY2027 non-GAAP net profit. The company's leading position in the Taotian business is stable, the growth rate of the cloud business is picking up, and the “buy” rating is maintained.

Risk warning: New business development falls short of expectations, increased competition in the industry, and the impact of live e-commerce.