Investment Rating - The report maintains a Buy rating for Alibaba Group with a target price of USD 150.00, down from USD 176.00, indicating a potential upside of 38.9% from the current share price of USD 107.99 [2][11][15]. Core Insights - The report highlights aggressive investments in food delivery (FD) and insta-shopping (Insta), which are expected to dampen near-term earnings outlook but are crucial for market share growth [11][19]. - Cloud revenue is projected to grow robustly, exceeding 20% year-on-year in FY26, driven by strong demand for AI services [2][4]. - The report emphasizes the importance of improving daily active users (DAU) and engagement with younger consumers to enhance market share and revenue [3][19]. Financial Performance and Estimates - Revenue estimates for FY26-28 have been increased by approximately 3-8%, while earnings estimates have been cut by 7-22% due to anticipated peak investments in the September quarter [2][52]. - For the June quarter, sales are expected to grow 4% year-on-year, with customer management revenue (CMR) and cloud revenue increasing by 11% and 23%, respectively [5][50]. - Adjusted EBITA is estimated to decline by 15% year-on-year to RMB 38.3 billion, reflecting a margin decrease of 3.4 percentage points [5][50]. Market Position and Competitive Landscape - Alibaba has gained significant market share in local services, with food delivery and insta-shopping market share increasing from over 20% in 2024 to 36% by July 2025 [3][21]. - The report notes that competition in the food delivery and insta-shopping sectors has intensified, with major players increasing subsidies to boost order volumes [19][21]. - The integration of Eleme and Fliggy into Taobao Tmall is part of Alibaba's strategy to consolidate leadership and enhance market share [3][19]. Cloud Computing and AI - Alibaba leads the GenAI IaaS service market with a 23.5% market share in the second half of 2024, with expectations of a 60%+ CAGR in the GenAI IaaS market from 2024 to 2027 [4][33]. - The report anticipates that Alibaba will leverage its scale in AI infrastructure and strong product capabilities to capitalize on the growing demand for AI services [4][28]. Valuation and Financial Ratios - The report provides a sum-of-the-parts (SOTP) valuation indicating that the domestic e-commerce, cloud, and cash components alone are worth USD 113.00 per share [2][39]. - Key financial ratios for FY26 include a PE ratio of 13.3x and an EV/EBITDA ratio of 8.8x, reflecting the company's valuation metrics [8][14].

Investment Rating - The report assigns a "Buy" rating to major companies in the China Internet sector, including Alibaba, JD.com, Meituan, and Tencent [28]. Core Insights - The quick commerce sector in China is experiencing rapid growth, with a projected market size of Rmb760 billion by 2025, representing 4-5% of the e-commerce market [3]. - Major players like Alibaba and Meituan are significantly increasing their investments to capture market share, with Alibaba committing Rmb50 billion and Meituan surpassing 120 million daily orders [2][3]. - The competition is described as a "game of chicken," with companies expected to continue heavy investments until at least the Double 11 shopping festival [4]. Summary by Sections Quick Commerce Competition - Competition in quick commerce is intensifying, driven by substantial platform subsidies from major players [2]. - Alibaba's Taobao InstaShopping and Meituan are leading in daily order volumes, with Alibaba achieving 80 million combined daily orders and Meituan surpassing 120 million [2]. Market Size and Growth - The total addressable market (TAM) for quick commerce is expected to grow by 30% by 2025, primarily taking market share from traditional retail rather than e-commerce [3]. - The rapid increase in order volume is attributed to consumer behavior and effective coupon utilization strategies [3]. Financial Implications - Earnings cuts are anticipated across e-commerce giants due to the competitive landscape, with expected annual investments of Rmb25 billion from JD, Rmb25-30 billion from Alibaba, and Rmb25 billion from Meituan [4]. - The report forecasts a market share split of 50% for Meituan, 30% for Alibaba, and 20% for JD in the medium term [4]. Stock Recommendations - The report suggests a cautious approach towards Meituan due to high earnings expectations and valuation concerns, while recommending Alibaba for potential value extraction if executed well [7]. - JD's valuation is considered undemanding, and its performance will be monitored as trade in subsidies fades [7].

Investment Rating - The industry investment rating is Attractive [9] Core Insights - Meituan has established a strong competitive advantage in quick commerce, with expectations for Alibaba's e-commerce and local services to enhance adoption [1][6] - Meituan's Instashopping gross transaction value (GTV) is projected to reach Rmb350 billion in 2025, reflecting a 30% year-over-year growth [5] - The downsizing of Meituan's Select mini program is viewed positively, as it allows for more investment in profitable areas like Instashopping and international expansion [4] Summary by Sections Meituan - Meituan is ramping up its quick commerce business by increasing the number of Instamarts and expanding product categories, with a focus on tier 1 and 2 cities [3] - The closure of Select warehouses, which incurred losses of approximately Rmb7 billion in 2024, is expected to free up resources for more strategic investments [4] - The company has over 30,000 Instamarts and more than 5,000 merchants, achieving break-even in 2024 [5] Alibaba - Alibaba is merging Eleme and Fliggy into its e-commerce group, which is anticipated to create strong synergies across e-commerce, on-demand delivery, and travel segments [12][13] - This strategic move follows JD's entry into quick commerce and food delivery, highlighting the competitive landscape [13] Financial Projections - Meituan's core local commerce operating profit (OP) is forecasted to be Rmb53 billion for 2025, with new initiatives expected to incur losses of Rmb11 billion [7] - The total on-demand retail market in China is projected to reach Rmb2 trillion by 2030, with Meituan's total on-demand retail GMV expected to reach Rmb1 trillion by the same year [18][22]