SPDB International·2025-09-02 07:48Investment Rating - The report maintains a "Buy" rating for Alibaba, with a target price adjusted to HKD 166 / USD 170, corresponding to a FY26E P/E of 20x [4][24]. Core Insights - The company reported FY26Q1 revenue of RMB 247.7 billion, a 2% year-on-year increase, which was below market expectations. Excluding certain segments, revenue growth was 10% year-on-year. Adjusted net profit was RMB 33.5 billion, down 18% year-on-year, primarily due to investments in the Taobao flash sale business [2][3]. - Alibaba has restructured its business segments into four main divisions: Alibaba China E-commerce Group, Alibaba International Digital Commerce Group, Cloud Intelligence Group, and Others [2]. - The CMR (Customer Management Revenue) is expected to maintain high growth rates, with a 10% year-on-year increase in FY26Q1, driven by an increase in take rates and improved penetration of software services [3]. - The cloud business is on an upward trajectory, with cloud revenue growing 26% year-on-year to RMB 33.4 billion, driven by strong demand for public cloud services. AI-related revenue has also seen triple-digit year-on-year growth for eight consecutive quarters, now accounting for 20% of external commercial revenue [4]. Summary by Sections Financial Performance - FY26Q1 revenue was RMB 247.7 billion, with a 2% year-on-year growth, and adjusted net profit was RMB 33.5 billion, down 18% year-on-year. The adjusted net profit margin decreased to 13.5% from 16.7% in the same period last year [2]. - The company expects revenue for FY26E to be RMB 1,021.9 billion, with adjusted net profit projected at RMB 147.7 billion [6]. Business Segments - The Chinese e-commerce revenue grew 10% year-on-year to RMB 140.1 billion, with CMR also increasing by 10%. Instant retail revenue rose 12% year-on-year, significantly benefiting from the launch of Taobao flash sales [3]. - International business revenue increased by 19% year-on-year to RMB 34.7 billion, with substantial reduction in losses, nearing breakeven [3]. Market Outlook - The report anticipates that instant retail will contribute an additional RMB 1 trillion in transaction volume over the next three years. The cloud business is expected to continue its growth trajectory, supported by strong demand and AI integration [4][19].