Ge Long Hui·2025-11-27 19:44Core Insights - The company reported better-than-expected revenue and adjusted EBITA for 2QFY26, with revenue increasing by 4.8% to 247.8 billion yuan, and a comparable growth of 15% after excluding asset off-balance sheet impacts, driven by strong performance in Chinese e-commerce [1] - Adjusted EBITA fell by 77.6% year-on-year to 9.1 billion yuan, primarily due to increased investments in Taobao Flash Sales, although it exceeded expectations due to strong performance in cloud and international businesses [1] Revenue and Growth Trends - Cloud revenue accelerated with a year-on-year growth of 34% in 2QFY26, with internal and external customer revenues increasing by 29% and 51% respectively, driven by demand for large model training and AI feature iterations in products like Amap, DingTalk, and Quark [1] - Cloud computing EBITA reached 3.6 billion yuan, with a profit margin of 9%, and cash capital expenditure was 31.5 billion yuan, indicating potential for upward adjustments in capital expenditure due to strong internal and external demand [1] - The company expects cloud revenue to maintain over 30% year-on-year growth in the coming quarters as capital expenditure increases and AI applications continue to develop [1] E-commerce Performance - Taobao Flash Sales showed improvement with a stable market share, although it recorded an EBITA loss of 36.7 billion yuan in 2QFY26 due to significant investments in expanding order volume [2] - The company anticipates a reduction in losses for Flash Sales to 19 billion yuan in 3QFY26, attributed to order structure optimization, increased average transaction value, and improved fulfillment efficiency [2] - E-commerce customer management revenue (CMR) grew by 10% this quarter, but excluding Flash Sales, the EBITA for Chinese e-commerce grew in the single digits, with expectations of a 6% growth in CMR for 3QFY26 due to pressures on e-commerce GMV and CMR [2] Profit Forecast and Valuation - The company maintains its revenue forecasts for FY26 and FY27, while raising the non-GAAP net profit estimates for FY26 and FY27 by 12% each, mainly due to better-than-expected reductions in food delivery losses, offset by increased losses in other businesses [2] - Using a sum-of-the-parts (SOTP) valuation, the company assigns a P/E of 14x for e-commerce and a P/S of 7x for cloud computing, maintaining target prices of 197 HKD for Hong Kong shares and 204 USD for US shares, indicating an upside potential of 25% and 27% respectively from current prices [2]