Financial Report Preview | Alibaba's GMV and Monetization Rate Expected to Increase, Share Repurchase Continues

From TF Securities.

Alibaba will announce its financial report on August 15th (Thursday).

Performance Outlook:

It is expected that Alibaba's revenue for FY25Q1 will be 248.8 billion yuan, with a yoy growth of 6.2%; the company's adjusted EBITA is expected to be 40.5 billion yuan, yoy -10.8%, with an EBITA margin of 16.3%; the Non-GAAP net profit is expected to be 42.1 billion yuan, yoy -6%.

Taotian Group:

Full-site promotion launched, GMV and monetization rate are expected to increase. It is expected that Taotian Group's revenue for FY25Q1 will increase by 2.8% yoy.

Overall retail consumption by residents in CY24Q2 continued to recover, with a year-on-year change in total social consumer goods retail sales in April/May/June at 2.3%/3.7%/2.0%;

The year-on-year changes in total online physical goods retail sales in April/May/June were -0.3%/0.3%/-10.0%. The performance of the 618 promotion was good, with 365 brands achieving over 100 million in transactions on Tmall 618, and over 36,000 brands doubling their transactions;

The transaction amount for Taobao's hundred-billion subsidy increased by 550% year-on-year;

The transaction volume of 1.9 million Taobao small and medium-sized merchants increased by over 100% year-on-year. On April 16th, Ali Mama launched full-site promotion, bridging the two-way channel between paid and organic traffic. We believe that full-site promotion is expected to become a key engine for the growth of the Taobao ecosystem, helping various types of merchants unleash new growth potential, and is expected to drive overall GMV growth and increase the monetization rate.

Cloud:

Large models are discounted, AI applications are landing in multiple fields. It is expected that the cloud business revenue for FY25Q1 will increase by 4.8% yoy. On May 21st, Alibaba Cloud announced a significant price reduction for its 9 commercialized and open-source series models. The price for Qwen-Long API, the main model of the Thousand Questions GPT-4 level, was reduced from 0.02 yuan/thousand tokens to 0.0005 yuan/thousand tokens. By the end of May, the Thousand Questions large model has been applied in various fields such as automotive, aviation, mining, education, healthcare, catering, gaming, cultural tourism, serving over 90,000 enterprises through Alibaba Cloud and over 2.2 million enterprises through DingTalk.

International E-commerce:

AliExpress and Magalu reached a cooperation, with the monetization rate expected to increase. We expect the international business revenue for FY25Q1 to increase by 34.7% yoy. On May 20th, Alibaba invested 230 million USD in Lazada. We believe that this investment may further strengthen Lazada's competitiveness in the Southeast Asian e-commerce market. On June 25th, AliExpress reached a cooperation with Brazilian retailer Magalu. The two platforms are expected to significantly expand their product supply, with Alibaba charging commissions on AliExpress products sold on Magalu. We believe that this cooperation may increase the monetization rate of international e-commerce.

Other Businesses:

We expect the local life revenue for FY25Q1 to increase by 11.1% yoy; the revenue for Cainiao to increase by 28.1% yoy, and the revenue for DME to decrease by 5.0% yoy

Continuous Share Repurchase

Or complete the dual listing conversion in August 24. As of the quarter ended June 30, 2024, Alibaba has repurchased a total of 613 million common shares, with a total amount of $5.8 billion. The remaining board-authorized amount in the stock repurchase plan is $26.1 billion, valid until March 2027. In addition, the company disclosed in the FY24Q4 financial report the progress of voluntarily converting to a dual primary listing on the Hong Kong Stock Exchange, indicating preparations for the primary listing in Hong Kong, with the conversion expected to be completed by the end of August 2024.

Investment Recommendation:

Since 2023, Alibaba has been continuously undergoing organizational restructuring, with personnel and strategies continuously adjusted, partially alleviating the pressure brought by intense market competition. Considering the company's emphasis on increasing investments to enhance competitiveness, we expect Alibaba's revenue for FY 2025-2027 to be RMB 1,024.9/1,123.6/1,219.3 billion (previously RMB 1,019.6/1,110.0/1,212.3 billion), with a year-on-year growth of 9%/10%/9%; we forecast Non-GAAP net profit for FY 2025-2027 to be RMB 156.5/162.2/164.7 billion (RMB 155.8/160.4/163.8 billion), maintaining a "buy" rating.

Risk Warning:

Macro-economic downturn, recurring epidemic, weak consumption; policy regulatory risks; intensified competition in the e-commerce industry; new business development falling short of expectations