BOCOM International·2025-07-21 09:24Investment Rating - The report maintains a "Buy" rating for Alibaba (BABA US) with a target price of $165, indicating a potential upside of 37.2% from the current price of $120.23 [1][6][13]. Core Insights - The report highlights that increased investment in flash sales is impacting profits, but the valuation is nearing a bottom. The focus on AI cloud services is expected to shift market sentiment positively [2]. - Revenue forecasts for FY26 have been slightly adjusted downwards by 0.9% for Q1 and 0.4% for the full year, while the market share for Taobao remains stable with a projected double-digit growth in CMR for Q1 [3][7]. - The report anticipates a continued acceleration in cloud business growth driven by AI demand, with a stable profit margin in the mid-single digits [2][3]. Financial Forecasts - Total revenue for FY26 is projected at RMB 1,039,034 million, reflecting a growth rate of 4.3%, down from the previous estimate of 5.2% [3][9]. - Adjusted EBITA for FY26 is expected to be RMB 213,506 million, a decrease of 13.9% from prior estimates, with a corresponding EBITA margin of 18.8% [3][9]. - The adjusted net profit for FY26 is forecasted at RMB 159,209 million, down 14.5% from previous estimates, with a net profit margin of 14.0% [3][9]. Segment Performance - The report provides a detailed breakdown of segment performance, with Taobao Group expected to generate RMB 449.8 billion in revenue for FY25, growing to RMB 496.9 billion in FY26 [8]. - The cloud intelligence group is projected to see revenue growth from RMB 118.0 billion in FY25 to RMB 141.8 billion in FY26, reflecting a strong demand for AI services [8]. - The report also notes that the local life group is expected to face challenges, with a projected revenue decline [8]. Market Data - Alibaba's market capitalization is approximately $268.8 billion, with a 52-week high of $147.57 and a low of $75.27 [5]. - The stock has shown a year-to-date increase of 41.8% [5]. Conclusion - The report emphasizes the potential for Alibaba to recover and grow, particularly through its cloud services and e-commerce segments, despite short-term profit pressures from increased investments in flash sales [2][3][7].