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Alibaba Alert:Catching our breath,recalibrating assumptions

十二月 1st, 2019  |  太阳集团财经

Core commerce re-investment to flow into B2C and New Retail.

    As the dust continues to settle in the wake of an impressive
Investor Day, wefurther refine assumptions across various segments of
the company. Weexpect FY18 core commerce to see some non-GAAP EBITA
margin dilutiongiven the re-investment plan in B2C and New Retail (DBe
non-GAAP EBITAmargin 58%). Maintain Buy on what we regard as eminently
achievable FY18expectations.

    Offline the real loser from 6/18 event and BABA’s robust growth.

    Tmall has readied itself for the“6.18” promotion event, cooperating
with some180,000 global brands and offering up to RMB10b in
coupons/discounts tocustomers, largely in FMCG, fresh food, and 3C.
Tmall is for the first timeextending its Supermarket service to overseas
markets (e.g., Hong Kong). Wecontinue to expect increased competition to
impair growth prospects notnecessarily for BABA’s e-commerce peers, but
for offline channels. We expectFY18 total China retail revenue (excl.
Intime) to grow by 46% YoY.

太阳集团娱乐网址404,    Shaving Cloud revenue on recent ESC price cut.

    We cut our FY18 cloud revenue by 7% to RMB12.5bn (+88% YoY).
Alibabaannounced another price cut of up to 35% on domestic ESC service,
and 31%overseas, at its Cloud Conference last week. Traditional
enterprise includingSOEs have become more willing to adopt cloud service
although the rampshould remain gradual. We envision significant upside
medium term but smallimpact short term. We meanwhile envision -1%
non-GAAP EBITA margin forFY18 (vs a prior -6%). AliCloud reiterated its
strategic focus on gaining marketshare given the recent gains of
domestic competitors.

    Managing Youku monetization for the sake of user engagement.

    Youku may see subdued monetization this year. With a digital media
&entertainment segment strategic focus on user experience, we expect
littleadvertising expansion. Subscription revenue will also take some
time due tocross-platform promotions, e.g. free 1-3 month Youku
membership for somepurchases on Tmall. In the medium term, we believe
that monetizationpotential lies in deeper cross-platform sales between
Youku and Tmall. Weexpect the digital media & entertainment segment to
grow by 36% in FY18.

    Tweaking TP to US$158; Maintain Buy; Revised assumptions easily
achievable.

    We reduce our FY18/19E revenue forecast by 0%/1% to reflect the
price cuts inAliCloud, and shave non-GAAP net income by 2%/2% due to
re-investment ine-commerce. Our TP is based on an unchanged SOTP: 1) 33x
CY17E P/E for ecommerce;2) 8x CY17E EV/Sales for AliCloud; 3) 29x
CY2017E EV/EBITDA forAnt’s payment and WM business, and 5.5x CY2017E
P/BV for the loan andinsurance business. 4) Cainiao last round valn; 5)
Net cash excl. AliCloud.

    Risks: slower revenue and user growth; intensifying competition; and
inabilityto expand or monetize AliCloud business.

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