Investment Rating - The investment rating for Alibaba-W (09988.HK) is "Buy" (maintained) [1] Core Insights - The report anticipates that Alibaba's total revenue for FY2026Q3 will reach 292.9 billion yuan, representing a year-on-year growth of 4.6%, primarily due to a slowdown in e-commerce revenue growth. The company is expected to continue investing in flash sales, which will pressure profits, with an adjusted EBITA forecast of 30.61 billion yuan and an EBITA margin of 10.5% for the quarter [7] - Alibaba Cloud is projected to achieve a revenue of 42.85 billion yuan in the same quarter, reflecting a robust year-on-year growth of 35.0%, driven by strong demand for AI computing power and services. The EBITA margin for Alibaba Cloud is expected to remain stable at around 9.0% [7] - The report maintains Non-GAAP net profit forecasts for FY2026, FY2027, and FY2028 at 101.53 billion yuan, 141.56 billion yuan, and 184.65 billion yuan, respectively, with corresponding PE ratios of 28.4, 20.4, and 15.6 times [7] Financial Projections - Total revenue projections for Alibaba are as follows: - FY2024A: 941.17 billion yuan - FY2025A: 996.35 billion yuan - FY2026E: 1,068.58 billion yuan - FY2027E: 1,158.75 billion yuan - FY2028E: 1,269.02 billion yuan - Year-on-year growth rates for total revenue are expected to be: - FY2024A: 8.34% - FY2025A: 5.86% - FY2026E: 7.25% - FY2027E: 8.44% - FY2028E: 9.52% [1][8] - The projected net profit figures are: - FY2024A: 80.01 billion yuan - FY2025A: 130.11 billion yuan - FY2026E: 82.64 billion yuan - FY2027E: 122.87 billion yuan - FY2028E: 166.01 billion yuan [1][8]

Group 1: Macroeconomic Insights - The forecast for the US GDP growth in 2026 has been raised to 2.6%, up from a previous estimate of 2.3%, driven by factors including the upcoming midterm elections and potential policy changes from the Trump administration [2][3] - The report highlights a potential rebound in inflation in the second half of 2026, despite a slight downward adjustment in inflation predictions due to various economic factors [2][3] - Structural issues in the US economy, such as asset price inflation and income inequality, are expected to worsen, indicating a "K-shaped" recovery [2][3] Group 2: Real Estate Policies - The Trump administration has announced a series of real estate policies aimed at stimulating demand, including a $200 billion mortgage-backed securities purchase plan and restrictions on large institutional investors in the single-family housing market [3][4] - These measures are expected to provide marginal support to the real estate market but may not effectively address housing affordability issues [3][4] Group 3: Employment Data - In December, the US added 50,000 non-farm jobs, falling short of the Bloomberg consensus estimate of 70,000, with the unemployment rate decreasing to 4.4% [5] - The labor participation rate declined to 62.4%, while hourly wage growth showed a slight increase, indicating a mixed employment landscape [5] Group 4: Sector Performance - The report suggests that the A-share market is experiencing a "spring rally," with a focus on sectors such as gaming, duty-free, batteries, engineering machinery, and agricultural chemicals for potential investment opportunities [7] - The Hong Kong stock market is expected to benefit from a combination of factors, including improved liquidity and upward revisions in profit expectations [8] Group 5: REITs Market - Recent policies from the China Securities Regulatory Commission and stock exchanges are expected to enhance the REITs market, promoting high-quality development amid OCI disturbances [22] - The report indicates that the REITs market may experience improved sentiment and quality as it enters a new phase of development [22] Group 6: Semiconductor Industry - The report emphasizes the growing demand for cleanroom facilities in the semiconductor industry, driven by increased capital expenditure from global tech giants [23] - The cleanroom engineering services sector is expected to see a rise in order rates, benefiting from the demand for advanced manufacturing processes [23]

Core Insights - Meituan has decided to suspend its "Tuan Hao Huo" (Meituan E-commerce) business to focus on exploring new retail formats [1][4] - The decision comes as the grocery retail industry evolves, and the current express e-commerce model struggles to meet the demands of instant retail consumers [1] - Meituan's Q3 financial report indicates strong growth in its new business segments, particularly in grocery retail [1] Group 1 - The "Tuan Hao Huo" business was launched in August 2020 as a B2C e-commerce initiative and was later integrated into the Meituan app [1] - The internal email from Meituan highlights the need for change in response to industry trends and consumer needs [1] - The company plans to communicate with affected personnel regarding future plans following the business suspension [1] Group 2 - Meituan has been actively exploring new retail formats and has announced plans to expand instant retail services, including the continued expansion of its flash purchase business [1] - The "Xiang Xiao Supermarket" service network has already reached over 30 cities, including major urban centers like Beijing, Shanghai, and Guangzhou [1]

Core Insights - Meituan has decided to suspend its "Tuan Hao Huo" business to focus on exploring new retail formats, indicating a strategic shift in its operations [2] Group 1: Business Overview - "Tuan Hao Huo" was launched in August 2020 as a B2C e-commerce initiative and was later integrated into the Meituan app as a primary entry point [2] - The business aimed to accumulate experience in product retail but faced challenges in meeting the demands of instant retail users in the evolving grocery retail sector [2] Group 2: Strategic Shift - Since 2025, Meituan has been intensifying its exploration of new retail formats, aiming for a strategic transformation in retail [2] - In June, Meituan announced plans to expand its instant retail offerings, including the continued diversification of its flash purchase business and the gradual expansion of "Xiang Supermarket" to all first- and second-tier cities [2] - Currently, "Xiang Supermarket" has established a service network covering over 30 cities, including major urban centers like Beijing, Shanghai, Guangzhou, and Shenzhen [2]

Core Viewpoint - Meituan has decided to suspend its "Tuan Hao Huo" business to focus on exploring new retail formats, responding to the evolving demands of the grocery retail industry [1] Group 1: Business Decision - The internal email from Meituan's grocery retail management team indicates that the decision to pause the Tuan Hao Huo business was made after thorough research and discussion [1] - Tuan Hao Huo, initially launched in August 2020 as a B2C e-commerce initiative, was integrated into the Meituan app in December 2020 and later rebranded as Meituan E-commerce [1] - The email states that while Tuan Hao Huo has accumulated experience in product retail, the rapid innovation in the grocery retail sector has made it challenging for express e-commerce to meet the immediate retail needs of users [1] Group 2: Strategic Shift - Since 2025, Meituan has been intensifying its exploration of new retail formats, aiming for a strategic transformation and upgrade in retail [1] - In June, Meituan announced plans to fully expand into instant retail, including the continued diversification of its flash purchase business and the gradual expansion of its "Xiaoxiang Supermarket" to all first- and second-tier cities [1] - Currently, Xiaoxiang Supermarket's service network covers over 30 cities nationwide, including major cities like Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, Nanjing, and Xi'an [1]

Core Viewpoint - Meituan has decided to suspend its "Tuan Hao Huo" business to focus on exploring new retail formats, following years of attempts to drive e-commerce through food delivery services [1] Group 1: Business Strategy - The "Tuan Hao Huo" business, a B2C e-commerce initiative launched in August 2020, has been rebranded as Meituan E-commerce and was integrated into the main app by December 2020 [1] - The internal email indicates that while the business has accumulated experience in retail, the rapid innovation in the grocery retail sector has made it challenging for delivery e-commerce to meet the demands of instant retail users [1] - Meituan is actively seeking to adapt to market trends and is undergoing a strategic transformation in its retail operations [1] Group 2: Financial Performance - Meituan's Q3 financial report indicates strong growth in its new business segment, particularly in grocery retail [1] - The company has announced plans to expand instant retail, including the continued diversification of its flash purchase services and the gradual expansion of "Xiaoxiang Supermarket" to all first- and second-tier cities [1] - As of now, the service network of Xiaoxiang Supermarket has reached over 30 cities across China, including major urban centers like Beijing, Shanghai, Guangzhou, and Shenzhen [1]

Positive Aspects - The performance of AI is strong, and there is anticipation regarding the resolution of the "food delivery war" [2] - The fundamentals of Hong Kong tech stocks remain solid, with the Hang Seng Tech Index closely tied to major companies like Alibaba, Tencent, and Meituan [2] - Recent earnings reports from Alibaba and Tencent show good returns from AI investments, while Meituan's struggles in food delivery have already been priced in by the market [2] - The "food delivery war" impact on companies like Alibaba, JD, and Meituan has likely peaked, with signs of stabilization in stock prices following earnings announcements [2] Negative Aspects - There is a slowdown in capital inflow, with some divergence in foreign investment [3][4] - Southbound capital has seen a net inflow of over 1,292.815 billion yuan this year, but the inflow has decreased in recent weeks [3] - Foreign investment is also net inflowing, but there is a split between active and passive funds, with active funds continuing to see outflows [4] Market Conditions - Attention is needed on the potential interest rate hike by the Bank of Japan, which could lead to a return of funds to Japan and increase liquidity pressure on Hong Kong stocks [7] - The recent rate cut by the Federal Reserve had a muted market reaction, indicating a cautious market sentiment [7] Investment Strategy - Monitoring trading volume is crucial, with a recommendation for dollar-cost averaging as a strategy to navigate current market conditions [8] - The average daily trading volume for the Hang Seng Index this year is 257.998 billion yuan, while the Hang Seng Tech Index averages 79.296 billion yuan [8] - A significant increase in trading volume above 100 billion yuan is necessary for a potential market turnaround, as current sentiment is low [9] - The Hang Seng Tech Index is currently undervalued at a price-to-earnings ratio of 23, indicating potential for future growth if market conditions improve [9]

Investment Rating - The report maintains an "Outperform" rating for the industry [5][37]. Core Insights - The report analyzes the recent financial performance of major players in the food delivery sector, including Meituan, JD Group, Alibaba, and Bawang Chaji, highlighting the impact of the ongoing delivery battle on their operations and profitability [1][2][3]. - It emphasizes that the low-frequency, low-ticket order subsidies are the primary reason for the significant losses in the instant retail business, which includes food delivery [2][19]. - The report suggests that the platforms are likely to return to a more rational subsidy strategy, focusing on high-ticket orders to improve unit economics [2][19]. Summary by Sections Meituan - In Q3 2025, Meituan reported revenues of 954.9 billion yuan, a year-on-year increase of 2.0%, but faced an adjusted net loss of 160.1 billion yuan, shifting from profit to loss [1][6]. - The core local business revenue was 674.5 billion yuan, down 2.8%, with an operating loss of 140.7 billion yuan [8][10]. - The food delivery segment is expected to see a 15% increase in order volume, but a 13% decline in revenue due to a decrease in average order value (AOV) and lower monetization rates [8][10]. JD Group and Alibaba - JD Group's Q3 2025 new business losses reached 157 billion yuan, while Alibaba's instant retail business incurred losses of approximately 361 billion yuan, with a per-order loss of about 5.3 yuan [2][17]. - Both companies are experiencing significant pressure on their overall performance due to the losses in their instant retail segments [2][19]. Bawang Chaji - Bawang Chaji reported a revenue of 32.08 billion yuan in Q3 2025, a decrease of 9.4%, with an adjusted net profit of 5.03 billion yuan, down 22.2% [3][21]. - The company has chosen a cautious approach to the delivery battle, avoiding price wars to maintain brand integrity and product strategy [3][32]. - The report notes that Bawang Chaji's same-store GMV declined by 27.9% in the Greater China region, reflecting the competitive pressures in the market [21][32]. Recommendations - The report recommends focusing on leading restaurant brands that are likely to benefit from increased subsidy efforts and are in a strong operational season, such as Guoquan, Haidilao, Yum China, and Xiaocaiyuan [3][37]. - It also highlights the potential of tea brands like Guming and Mixue Group, which are actively expanding their product offerings and private traffic strategies [3][37].

Core Insights - Meituan's 3Q25 performance slightly missed expectations, with management anticipating a narrowing of core local commerce (CLC) operating losses in 4Q25 [3][4] Financial Performance - 3Q25 revenue reached RMB 95.5 billion, a 2% year-over-year increase but 2% below market consensus [3] - CLC revenue declined by 2.8% year-over-year to RMB 67.4 billion, while new initiatives revenue rose by 16% year-over-year to RMB 28 billion [3] - CLC operating loss widened to RMB 14.1 billion, compared to a consensus loss of RMB 13 billion, with an operating margin of -21% [3][4] - Adjusted net loss was RMB 16 billion, slightly larger than the expected RMB 14 billion loss [3] Market Dynamics - Competitive intensity in food delivery has decreased since Singles' Day, allowing Meituan to recover market share in order value while maintaining a leading gross transaction value (GTV) share [4] - The company expects the food delivery segment to incur notable operating losses in 4Q25, depending on competition levels in December [4] New Initiatives and Growth - Management indicated that the operating loss for Instashopping may slightly widen in 4Q25 due to increased investments in user experience during promotional campaigns [5] - The launch of Branded Flagship InstaMart in October has shown potential, with hundreds of partner brands achieving over 300% year-over-year sales growth during Singles' Day [5]

Core Viewpoint - Morgan Stanley predicts that Alibaba's comprehensive profitability will reach an inflection point in Q3 2025 and significantly recover in Q4, driven by a substantial reduction in losses from the food delivery business and accelerated growth in cloud services due to strong AI demand [1][2][3] Business Performance - The food delivery business is expected to see a 40% quarter-on-quarter reduction in losses, projected to narrow to approximately 21 billion yuan by Q4 2025 [1][3][4] - The cloud business is anticipated to grow by 37% year-on-year in Q4 2025, benefiting from robust AI demand [1][3][7] Strategic Shift - Alibaba's strategic focus is shifting from a user-scale-driven growth model to a more efficient, profitability-driven approach, indicating a fundamental transformation in its growth strategy [2][5][6] Financial Adjustments - Morgan Stanley has adjusted its revenue forecasts for Alibaba, lowering the projections for FY26 and FY27 by 1% and 2% respectively, due to high base effects impacting customer management revenue (CMR) growth [8] - Despite these adjustments, the firm maintains a positive outlook on Alibaba's stock, reiterating a "buy" rating and setting new target prices of $230 for US shares and HK$225 for Hong Kong shares [3][8] Market Dynamics - The flash purchase business is showing a clear path to profitability, with unit economic losses halving compared to July/August, driven by improved product mix and reduced delivery costs [4][6] - The cloud business is experiencing strong demand that exceeds supply capabilities, leading to potential increases in capital expenditures beyond the planned 380 billion yuan over three years [6][7]