Core views
conglomerate
Facing core problems: 1) The main e-commerce business was affected by competition from Douyin e-commerce and Pinduoduo, and its share continued to decline, and monetization rate growth stagnated; 2) Investing large amounts of resources in new retail, shopping, and vegetable shopping businesses in the early stages did not find new growth points.
Wu Yongming's solution: 1) Sorting out strategic priorities and clarifying that e-commerce and cloud are Ali's core businesses. The two strategic directions are putting users first and focusing on artificial intelligence, stopping the spin-off and listing of sub-groups such as AIDC, Cainiao, and Cloud Intelligence, and concentrating all resources on the core business; 2) Personnel adjustments: the young management team completely replaces the original executives and “fully uses a young management team that has been trained and emerged at the grassroots level.”
Taotian's main business
What's the new growth story? Give full play to the advantages of “universal Taobao”, increase the wallet share of core high-quality users through 88VIP's rich shopping benefits, and drive GMV growth. We expect Taotian FY25 to take an additional 2% of revenue for GMV growth (9-10 billion), with 88VIP members adding 5.3 billion in losses. FY25 is expected to drive GMV YoY +2%. The remaining 4-5 billion yuan will be invested in global user subsidies and merchant incentives to fill the GMV growth gap. In the long run, the consumption level of a single member will increase as the membership entry time increases. The GMV increase brought by 88VIP will expand, and the vouchers and merchant incentives that drive GMV growth in the short term will drop drastically. At the same time, the platform will transfer some 88VIP membership costs to merchants and brands. The profit and loss of individual members will improve, the flywheel rotates spontaneously, and the platform's profit margin will rise steadily.
How can sitewide promotion increase platform revenue? The sitewide promotion is aimed at novice merchants and merchants experiencing bottlenecks in volume. The traffic pool is larger and extremely automated. We believe that full-site promotion mainly depends on increasing the penetration rate of paying merchants to drive up platform revenue. 1) Leading merchants generally operate in a refined manner, and the incremental value is limited; 2) Small and medium-sized merchants are relatively extensive. Global promotion can effectively expand the traffic pool and reduce labor costs, and the incremental value is higher. Under pessimistic/neutral/optimistic assumptions, the FY2027 Taotian monetization rate increased to 3.92%/4.02%/4.12%, and the CMR CAGR for the next two years is expected to be 10%/11%/12%, respectively. It is worth mentioning that easing external competition is conducive to the return of commercials' advertising budgets to Taotian and the increase in revenue of the Taotian platform.
Risk warning: policy risk, macroeconomic weakness risk, market competition and innovation risk, etc.