Investment Rating - The report maintains a "Buy" rating for the company, with a target price of HK$ 180 [1][6]. Core Insights - The company reported FY2026 Q2 revenue of RMB 247.8 billion, a year-on-year increase of 5%. Excluding disposed businesses, the revenue growth was 15%. Operating profit decreased by 85% to RMB 5.4 billion, while net profit attributable to shareholders fell by 53% to RMB 21 billion, aligning with market expectations [7]. - The core e-commerce business remains stable, with customer management revenue increasing by 10% to RMB 78.9 billion, driven by the improved penetration of the service fee model and a significant rise in monthly active consumers on the Taobao app [9]. - The timely retail business experienced rapid growth, with revenue up 60%, and losses are expected to decrease in line with market forecasts [9]. - Cloud business revenue exceeded market expectations, reaching RMB 39.8 billion, a 34% year-on-year increase, primarily due to growth in public cloud services and increased adoption of AI-related products [9]. - Capital expenditures remain high at RMB 31.4 billion, with a potential increase in the three-year total spending guidance to RMB 380 billion, reflecting continued strong investment in AI [9]. Summary by Sections Financial Performance - For FY2026, the company is projected to achieve a net profit of RMB 116.3 billion, a decrease of 10.6% year-on-year, with EPS of RMB 6.12, corresponding to a P/E ratio of 23.58 [11]. - The company’s net profit for FY2024 and FY2025 is expected to be RMB 80.0 billion and RMB 130.1 billion, respectively, with significant growth in FY2025 [11]. Market Position - The company holds a market capitalization of HK$ 175.3 billion, with a share price of HK$ 157.80 as of November 25, 2025 [2]. - The stock has shown a significant increase of 85.92% over the past month, although it has decreased by 9.10% over the past year [2]. Shareholder Information - Major shareholders include JPMorgan Chase & Co., holding 3.57% of the shares [2].

Core Viewpoint - Tencent and Alibaba have shown a V-shaped recovery in their stock prices, indicating the attractiveness of Chinese tech companies in the capital market, despite not maintaining a growth trend recently [1][3]. Group 1: Market Capitalization and Stock Performance - As of September 17, Tencent's market capitalization was 6.06 trillion HKD, while Alibaba's was 3.08 trillion HKD. By September 18, Tencent's market cap decreased to 5.88 trillion HKD and Alibaba's to 3.02 trillion HKD [1]. - Tencent's stock price has rebounded 290% from 170.17 HKD on October 31, 2022, to 664.5 HKD on September 18, 2025 [3]. - Alibaba's stock price increased from over 80 HKD to nearly 170 HKD since 2025 [3]. Group 2: Market Environment and Investment Sentiment - The market environment for tech stocks has improved, driven by breakthroughs in domestic models like DeepSeek, leading to a 37% average increase in valuations for Chinese AI-related companies over the past year [3][4]. - Tencent announced a share buyback plan totaling 112 billion HKD for 2024, signaling confidence in its stock [4]. - Goldman Sachs has increased its target price for Tencent to 701 HKD and for Alibaba from 158 HKD to 174 HKD, reflecting growing investor confidence [5]. Group 3: Strategic Focus and Business Models - Tencent has built a robust moat through "precise investment and ecological synergy," while Alibaba is balancing "technology research and business expansion" [1][7]. - Tencent's diversified ecosystem, including gaming, fintech, and advertising, provides stronger risk resistance compared to Alibaba's reliance on e-commerce [7][8]. - Both companies are leveraging the AI wave, with Tencent optimizing existing businesses and Alibaba investing in future technologies [8]. Group 4: Financial Performance - In Q2 2025, Alibaba reported revenue of 247.65 billion CNY, a 2% year-on-year increase, while Tencent's revenue was 184.5 billion CNY, reflecting a 15% year-on-year growth [8]. - Tencent's non-IFRS operating profit grew by 18%, while Alibaba's net profit decreased by 18% [8].

Investment Rating - The report assigns a "Buy" rating for Alibaba Group (09988.HK) with a target price of HK$ 150 [1][7]. Core Insights - Alibaba's Q1 FY2026 revenue reached RMB 247.65 billion, showing a year-over-year increase of 2%. Adjusted EBITDA was RMB 45.74 billion, down 11% year-over-year, while non-GAAP net profit was RMB 33.51 billion, down 18% year-over-year. The performance met market expectations, maintaining the "Buy" rating [7]. - The company's investment in instant retail is beginning to yield results, with e-commerce growth aligning with market expectations. Despite a slight decline in profits due to competition, Alibaba's performance outpaced rivals like Meituan and JD.com [9]. - The cloud intelligence segment reported revenue of RMB 33.4 billion, a 26% year-over-year increase, driven by growth in public cloud services and AI product adoption. Profitability in this segment improved, with a profit margin of 8.8% [9]. - Capital expenditures for FY26Q1 were RMB 38.6 billion, a significant increase of 224% year-over-year, reflecting ongoing investments in AI and cloud services. The company plans to invest RMB 380 billion in AI over the next three years [9]. Summary by Sections Company Overview - Industry: Retail [2] - H-Share Price (as of 2025/08/29): HK$ 115.70 [2] - Market Capitalization: RMB 193.66 billion [2] - Major Shareholder: JPMorgan Chase & Co. (3.57%) [2] Financial Performance - Q1 FY2026 Revenue: RMB 247.65 billion, YOY +2% [7] - Adjusted EBITDA: RMB 45.74 billion, YOY -11% [7] - Non-GAAP Net Profit: RMB 33.51 billion, YOY -18% [7] E-commerce and Cloud Business - Instant retail revenue: RMB 14.8 billion, YOY +12% [9] - Daily average orders for instant retail: 120 million in July, 80 million in August [9] - Cloud intelligence revenue: RMB 33.4 billion, YOY +26% [9] Capital Expenditure and Future Outlook - FY26Q1 Capital Expenditure: RMB 38.6 billion, YOY +224% [9] - Planned AI investment over three years: RMB 380 billion [9] - Profit forecasts for FY2026-2028: RMB 116.33 billion, RMB 139.39 billion, RMB 160.77 billion respectively [11].

Core Viewpoint - Alibaba is expected to report a revenue growth of 2% year-on-year for Q1 FY26, with an adjusted EBITA margin of 16% [2][3] Revenue and Growth Projections - The anticipated revenue for Q1 FY26 is 247.8 billion, reflecting a 2% year-on-year increase, with growth rates for various segments as follows: Taotian at 9%, International Digital Commerce at 19%, Cloud Intelligence Group at 22%, Local Life at 10%, Cainiao at -5%, and Big Entertainment at 5% [2][3] - The slowdown in revenue growth is primarily attributed to the divestiture of Gaoxin Retail and Intime [3] Segment Analysis - Taotian Group is projected to achieve a GMV growth of 6% year-on-year, with a CMR increase of 11%, driven by site-wide promotions and a 0.6% contribution from technology service fees [2] - The Cloud segment is expected to accelerate with a revenue growth of 22% year-on-year, supported by increasing AI demand [2] - AIDC is forecasted to grow by 19% year-on-year, with a decrease in adjusted EBITA margin by 6%, but a significant reduction in losses [2] Profitability and Investment Impact - The adjusted EBITA for Q1 FY26 is estimated at 39.2 billion, reflecting a year-on-year decrease of 13% and a margin decline of 3 percentage points [3][4] - Increased investment in instant retail is expected to pressure short-term profits but may enhance user engagement and purchase frequency in the long term [4] Future Revenue and Profit Adjustments - Revenue forecasts for FY2026 to FY2028 have been slightly adjusted to 1,062.3 billion, 1,149.0 billion, and 1,217.4 billion respectively, with adjustments of +1.0%, +2.2%, and +0.8% [4] - Net profit forecasts for FY2026 to FY2028 have been revised to 138.8 billion, 171.8 billion, and 195.4 billion respectively, with adjustments of -16.8%, -5.7%, and -2.9% [4] Valuation - The company is currently valued at a PE ratio of 13 times for FY2026, maintaining an "outperform" rating [4]

Investment Rating - The report maintains a positive outlook on the Hang Seng Technology sector for the second half of the year, suggesting that the sector is worth focusing on due to the presence of many scarce quality assets [4][13]. Core Insights - The report highlights that the narrative of asset revaluation in China has gained momentum, leading to a rebound in Hong Kong stocks, although valuations remain relatively low. The uncertainty surrounding US-China trade negotiations may impact risk appetite and profit expectations, but domestic policy support is expected to drive fundamental recovery [8][13]. - Two main investment themes are suggested: 1. Companies benefiting from AI catalysis and upward fundamental trends, specifically Alibaba and Kuaishou. 2. Companies with solid business models and long-term barriers, actively expanding into overseas markets and food delivery, such as Meituan, Pinduoduo, and JD Group [3][13]. Summary by Sections Investment Recommendations - The report recommends focusing on the Hang Seng Technology sector, which is expected to perform well in the second half of the year due to improving fundamentals and capital conditions [4][13]. - Specific companies to watch include: - **Alibaba**: Expected continued growth in its cloud business and e-commerce, with a projected 12% year-on-year increase in CMR for Q4 FY25 [3][13]. - **Kuaishou**: Anticipated improvement in its e-commerce business due to strategic adjustments by Douyin [3][13]. - **Meituan**: Short-term investments are expected to solidify market share, with a long-term competitive advantage in food delivery [3][13]. - **Pinduoduo**: Focus on ecosystem building, with expectations of profit recovery in the second half of the year [3][13]. - **JD Group**: Strong performance in Q1 2025, with significant growth in active user numbers and order volumes [3][13]. E-commerce Trends - The e-commerce sector is shifting from price competition to differentiation, as major platforms adjust their strategies to focus on GMV rather than solely on price competitiveness [15][18]. - The report notes that Alibaba, JD, and Pinduoduo are all experiencing changes in revenue growth rates, with Alibaba and JD showing acceleration while Pinduoduo faces short-term profit pressures [22][30]. Local Services and Delivery - Meituan's core local business revenue is accelerating, attributed to reduced competition and improved departmental synergy [46][44]. - The report emphasizes the importance of food delivery as a business with strong network effects, with Meituan expected to maintain a solid competitive position despite short-term challenges [50][54]. Technology Investments - Alibaba plans to invest 380 billion RMB in AI and cloud computing over the next three years, with its cloud business showing strong growth driven by AI-related products [62][59]. - Kuaishou's AI capabilities are being enhanced with the launch of its upgraded models, which are expected to lead the industry in various performance metrics [63][65].