HTSC·2025-07-11 02:12Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 150.00 and USD 152.90 [6][7]. Core Insights - The company is expected to experience short-term profit pressure due to increased investment in flash sales, although its e-commerce business is projected to perform steadily in 1QFY26 with a year-on-year growth of 11% in CMR [1][2]. - The cloud business is anticipated to continue its accelerated growth, with a projected revenue increase of 22% year-on-year in 1QFY26, supported by strong external demand [1][2]. - The report highlights the rapid growth of the flash sales business, which launched on May 2, and the significant investments made to attract both merchants and consumers [3][4]. Revenue and Profit Forecast - The company’s revenue for 1QFY26 is expected to increase by 1% year-on-year to CNY 245.7 billion, with adjusted EBITA projected to decline by 16.5% to CNY 37.6 billion due to increased spending on flash sales [2][11]. - The adjusted net profit forecast for FY26, FY27, and FY28 has been reduced by 20.6%, 22.2%, and 21.3% respectively, reflecting the higher-than-expected investments in flash sales [4][11]. Business Segments and Performance - The report notes that the flash sales business has seen a rapid increase in daily order volume, reaching over 80 million orders per day, with significant user engagement improvements [3][4]. - The company’s various business segments, including the Taobao Group and local life services, are expected to show mixed performance, with some segments continuing to reduce losses while others face challenges [2][11]. Valuation and Estimates - The report adjusts the valuation based on a sum-of-the-parts (SOTP) approach, with new target prices reflecting a decrease due to increased competition and investment pressures [4][14]. - The estimated non-GAAP net profit for FY26 is projected at CNY 134 billion, with a corresponding PE ratio of 13.36 [10][12].