Shenwan Hongyuan Securities·2025-12-24 12:51Investment Rating - The report maintains a "Buy" rating for Alibaba Group [6][9]. Core Insights - The report emphasizes that Alibaba Cloud has emerged from its low point, with a positive outlook on its fundamentals and a consensus in the market regarding its revaluation [4][40]. - The growth of AI cloud services is expected to continue, driven by improvements in upstream chip supply and increasing penetration of AI applications [8][24]. - Alibaba is positioned as a leading cloud provider in China with a comprehensive self-developed technology stack, including chips, servers, and cloud computing systems [12][35]. Financial Data and Earnings Forecast - Revenue projections for Alibaba Group are as follows: - FY2024: 941.2 billion CNY - FY2025: 996.3 billion CNY - FY2026E: 1,038.6 billion CNY - FY2027E: 1,143.4 billion CNY - FY2028E: 1,250.6 billion CNY - Adjusted net profit forecasts are: - FY2024: 158.4 billion CNY - FY2025: 157.9 billion CNY - FY2026E: 101.9 billion CNY - FY2027E: 145.5 billion CNY - FY2028E: 183.6 billion CNY - The report anticipates a diluted earnings per share of 7.8 CNY for FY2024, increasing to 9.6 CNY by FY2028 [5][41]. AI Growth and Competitive Position - The report highlights that Alibaba Cloud's AI capabilities are expected to drive significant growth, with revenue growth rates projected at 34%, 29%, and 23% for FY2026 to FY2028 [10][40]. - Alibaba's strategy includes capturing the consumer end (C-end) market through AI applications, enhancing user engagement and data assets [12][30]. - The report notes that despite competition from ByteDance's Volcano Engine, Alibaba Cloud's comprehensive solutions and ecosystem integrity provide a competitive edge that is difficult to replicate in the short term [11][30]. Valuation and Target Price - Using the Sum-of-the-Parts (SOTP) valuation method, the target valuation for Alibaba Group is set at 34,124 billion CNY, corresponding to a target price of 203 USD per ADS and 197 HKD per share, indicating a potential upside of 34% [9][40].