text | Dolphin Investment Research
In the past two days, the market has finally begun to smell Ali's hope, and the company's stock price has risen from US$65 to US$85. Now, Ali has finally handed in the application. What is the actual situation? Dolphin Jun is divided into two parts, good and bad, hurry up and take a look:
1) Looking forward to the stars, looking forward to the moon, and finally looking forward to the dual main listing
Alibaba announced that it will complete the main listing conversion in Hong Kong by the end of August 2024, becoming the New York Stock Exchange and the Stock Exchange The company is a dual-listed company. This is something the market has been looking forward to since Ali returned to Hong Kong at the end of 2019. The main role of Hong Kong as the main listing place is that Alibaba can enter the Hong Kong Stock Connect and accept investment from funds like Nan who are more familiar with the business, which should help improve Alibaba's continued undervaluation.
2) Repurchase, seriously! In
's last financial report, the company expanded its repurchase ammunition library to US$35.3 billion (valid until March 2027). Previously, Ali had announced that it had repurchased US$4.8 billion in the March quarter, and last year's repurchase amount reached US$12.5 billion. There is still $30 billion in repurchases left. This means that in the past three years, the average annual repurchase amount will still be 10 billion US dollars.
As for the amount of dividends, the total dividends for the fiscal year ending in March were US$4 billion, of which regular dividends were US$2.4 billion and special dividends were US$1.6 billion. According to this standard, even if there are no special dividends, the dividends in the next three years are estimated to be at least US$2.5 billion per year.
In a past financial report, Alibaba's dividend + buyback in one year was 12.5 billion US dollars plus 4 billion US dollars, with a return rate of up to 8%; and in the next three years, even if it is not as high as in the past year, 10 billion buybacks The +2.5 billion dividend is also guaranteed, and the current market value of Alibaba is less than 210 billion, and the corresponding return rate has reached 6%, which is significantly higher than the U.S. bond yield. Such a return rate is expected to attract Alibaba after it enters the Hong Kong Stock Connect. Allocate long-term funds such as domestic insurance funds.
3) Key answer to question 1: Alibaba Cloud’s revenue and profit are both good
This time, only Alibaba Cloud is good at both ends. The private cloud pruning process, which has low project profits and is difficult to replicate, is coming to an end. Alibaba Cloud has begun to show some improvement. Revenue of 25.6 billion corresponds to a positive year-on-year growth of 3.4%, which is slightly higher than market expectations. Moreover, with double-digit year-on-year performance for core public cloud and three-digit year-over-year performance for AI related products, Alibaba Cloud is showing signs of bottoming out.
More importantly, while achieving this growth, Alibaba Cloud's profit release has actually become better. After removing low-quality projects, even though Alibaba Cloud's public cloud products have significantly reduced prices, the adjusted profit still reached 1.4 billion+, year-on-year. An increase of 6%.
4) Key answer to question 2: Taotian can barely do it
Because Ali is still the size of an elephant now, he is lying on the operating table, scraping bones and healing his injuries. If we talk about small improvements, this time we can actually talk about the Taotian business that has been suffering from illness:
Taotian gmv and order volume have achieved double figures in the March quarter by rejecting return orders (note that the impact of "refund only" has been eliminated). Dolphin estimates that the growth will be in the low double digits and the order volume will be high in the double digits. Even if there is a low base year-on-year issue in the previous year, the double digit growth is, for Taotian, , finally. "Come back to your senses" .
However, due to Taotian's re-entering the investment period, the realization rate has been reduced. In fact, Taotian's customer management revenue only increased by 5%. This investment not only reduced fees for merchants, but also increased subsidies for users. In the end, Taotian's adjusted profits (adj ebita) fell 1.4% year-on-year.
has exceeded expectations. The release of this set of numbers is a real improvement for Taotian, which continues to be sluggish. It's just that this good news has been fully priced after the fermentation of the market, and the market has already raised expectations.
The real incremental information in this financial report is on the profit side: How much did Ali spend to achieve these revenue and operational goals? Regarding this real incremental information, the answer given by Alibaba's financial report is generally disappointing in Dolphin's view. Taotian's business has not stopped declining in profit as Dolphin expected.
) Alibaba International, a big step in revenue and a big step in losses
Currently one of Alibaba’s three major focuses (domestic retail, international retail and Alibaba Cloud), Alibaba International did not fall behind on a high base this quarter, achieving a year-on-year growth of 45% growth, the revenue volume has exceeded the cloud business, and is higher than the 35-40% expected by the market. However, behind the rapid growth of this business is the adjustment of the model: in April, the contribution of choice orders under the hosting model accounted for When it reached 70% of AliExpress's overall share, AliExpress began to fully tilt towards the hosting model from the backend and frontend, driving a 56% year-on-year growth in international retail revenue.
's order volume, which better reflects the endogenous organic growth of the business, has increased by 20% year-on-year. The managed orders account for 70%. After the space for increasing revenue through model changes is reduced, in the future, we must focus on the orders brought by investment. Quantitative growth rate.
Moreover, due to increased investment, losses have also increased. The adjusted loss reached 4.1 billion yuan, slightly exceeding market expectations. After winning Tang Wei and Saudi star players, as well as sponsoring the Olympic Games and the European Cup, and even more well-known global spokespersons to invest in the future, AliExpress may suffer even greater losses.
However, under the current circumstances, as one of the few businesses in Alibaba’s track layout that still has track dividends, Dolphin Mr. Dolphin does not use a magnifying glass to criticize this kind of front-loaded investment. What he is more concerned about is that these investments will continue to spread. After that, within one or two years, will Ali International be able to have a new life?
6) Cainiao: The infrastructure business has grown rapidly following Alibaba International, and thanks to
Cainiao is about to continue to turn positive profits. In the first quarter, as the international business increased its overseas investment, it promoted 5-day delivery, and its revenue accelerated by 30%, while it suffered losses at the same time. Amplification-from the adjusted profit of 1 billion in the previous quarter, it turned into a loss of more than 1.3 billion, which was significantly worse than the market expected profit of 330 million. Since international business and fiscal year are two-way relationships, Cainiao’s current losses are due to its investment in international business, and there is no harsh blame.
7) Local Life: Increase Revenue, Reduce Loss
Local Life achieved a 19% year-on-year revenue growth in this quarter, and the growth rate has accelerated. At the same time, as the second largest loss maker after international business, unlike international business, the trend of loss reduction in this business is still continuing. The 22% loss rate is an improvement compared to last year's 33%. However, compared with the previous three quarters, the loss rate has actually increased. The loss rate of this business also exceeds market expectations.
8) Others: Pan-entertainment and a host of other businesses are completely lackluster in terms of total number. , especially pan-entertainment, has a negative year-on-year revenue growth and its losses are still increasing. In addition, Ant’s profit in the fourth quarter of last year should not be very good from the perspective of Alibaba’s profit distribution data. The profit fell by 20%+ year-on-year.
) From the gross profit margin exceeding expectations and operating profit margin lower than expected: Behind the high and low trend is a very clear trend. After Taobao returned to the Internet, assets have become lighter than expected, but the weight has not changed. As market competition changed, a large amount of investment began to be made in marketing expenses. However, the final operating profit was still lower than market expectations.
ten) tailor tailor ! Corresponding to the core business investment investment, the overall staff of the Alibaba Group is still in a state of accelerating layoffs. As the first quarter of the natural year ends and the new year begins, Alibaba slashed nearly 15,000 people! The last peak of layoffs was 9,500 in the March quarter of 2022. The intensity and speed of layoffs have accelerated almost visibly. But even so, Alibaba's number of employees is still very high, reaching 205,000.
From looking at Alibaba to now, I have a very clear feeling: Alibaba’s input and output basically cycle every five years. The previous five-year cycle started in 2015-2016 was mainly focused on assets, and starting from 2024, the next cycle will It should be about shedding burdens and reducing assets, but we are still in the asset-light + investment period, so the profit side of the report is still very uncomfortable.
Dolphin Investment Research’s opinion:
Originally, Ali’s restart of investment scared investors. After all, judging from the situation in the past few years, when Ali mentioned the investment period, it basically started with a bang and ended without results.Now investment has begun again, but this round of investment has only been carried out for a few quarters. One obvious difference is: Alibaba changes again, and this time it may be different.
also saw signs of "recovery" in Taotian. Some time ago, Alibaba has rebounded from 65 US dollars in the absolutely undervalued area to 85 US dollars. In other words, the core - some signs of recovery reflected in Taotian's business have been Fund pricing has gone some way. What
is really concerned about in this financial report is how much cost Alibaba invested in achieving this result. Is it the result of super high efficiency? This is the real marginal incremental information. Unfortunately, Alibaba did not give a good answer in terms of profits this time.
However, this problem, to a certain extent, is also the hope that the market, including Mr. Dolphin, has reported that "iron cannot be made into steel". From a rational perspective, Taotian is still repairing the bottom floor of the building, and its international business has brought rookies into the investment-invest-invest mode. Indeed, we should not place too high hopes.
In the future, both international business and domestic retail business will increase investment. In the early stages of this round of investment, Alibaba has too many areas to repair, and I am afraid it will still be very slow to recover. To sum up, Alibaba as a whole is still a third-line story of weak fundamentals + buybacks + dual main listings. In this case, Mr. Dolphin’s logic regarding the investment value of Alibaba at the current stage has not changed:
a) Alibaba still holds a net cash of close to 50 billion U.S. dollars;
b) at 85 U.S. dollars (210 billion U.S. dollars), The guaranteed annual dividend repurchase volume of US$12 billion+ corresponds to a dividend repurchase yield of 6%, which is well above the U.S. bond yield.
Again, even if Alibaba’s performance bottoms out on the operating table in 2024, with the support of buybacks, its valuation bottom is actually very clear - every time Alibaba falls between 65-70, When the repurchase yield has exceeded 7%, the margin of safety has become extremely clear.
Of course, some people may worry that after increasing investment, Alibaba’s operating cash flow will weaken (this quarter is the off-season, 23.3 billion, a year-on-year decrease of 26%. If the next fiscal year continues to decline at this rate, Alibaba’s full-year There are already 140 billion cash inflows left), but even if the cash flow weakens, the operating cash inflow of 140 billion US dollars a year is still exaggerated. Correspondingly, with a dividend repurchase of 12.5 billion US dollars a year, the dividend repurchase ratio is only 65% (of course most of them Operating cash flow is generated domestically, and it is difficult to actually transfer it out for dividend repurchases).
In one sentence, net cash of US$50 billion + annual operating cash inflow of around US$20 billion, dividend buyback of US$12.5 billion a year, corresponds to a shareholder return rate of 6%, and the fundamentals are gradually improving step by step. Afterwards, there were signs of recovery, and Alibaba’s investment logic was quietly reversing. For Alibaba this year, Mr. Dolphin focused on the reversal of investment value.
The following is a detailed analysis of performance:
1. Alibaba’s new financial report caliber
Ali will significantly adjust the caliber of financial report disclosure starting in June 2023. In order to facilitate everyone’s understanding, Dolphin Mr. will first take you to recall Ali’s new financial report caliber:
1) Taotian Group: Taobao, Tmall, Tmall supermarket + direct import; domestic wholesale;
2) International group: cross-border retail AliExpress, cross-border wholesale international station, overseas local retail lazada, trendyol, etc.;
3) Local life: Hungry Lime and AutoNavi;
4) Cainiao Group: The same as before, but now the revenue calculation method treats other businesses within the Alibaba Group as customers, and the revenue they generate is included in the revenue of Cainiao;
5) Smart Cloud Group: Alibaba Cloud, DingTalk was divested of other businesses in the September quarter of 2023;
6) Pan-Entertainment Group: Youku and Alibaba Pictures;
7) All the rest: Sun Art, Hema, Ali Health, and Intime (these three include offline businesses) Self-operated new retail, originally in the domestic business business); Lingxi Interactive, UC, Quark (originally in the pan-entertainment business), Fliggy (originally in the local life business), and DingTalk (originally in the cloud business).
2. Returning users to Taotian, the results and prices are not low
After setting the top-level strategy of Taobao and Tmall returning to users, under the measures of traffic tilting towards small and medium-sized merchants and benefiting consumers, the order growth rate > gmv growth rate > Revenue growth > greater than profit growth is the general consensus that Taotian Group's performance trend will be in the coming period.
In this quarter, company stated that gmv had double-digit growth, and had hinted that Alibaba’s share was increasing. should therefore be slightly higher than the industry growth rate of 11.6%. Taotian's domestic retail customer management revenue (cmr) increased by 5% year-on-year. has significantly accelerated compared to the previous quarter. is slightly higher than the seller's growth rate of approximately 3% expected. However, according to Dolphin Investment Research, the buyer's expectations for cmr before 's performance should also be close to 5%. There are signs of improvement in the trend, but the expected difference angle is not a surprise.
From this point of view, after a series of reforms, Taotian's growth should indeed be healthier - merchants/users return, users place more and more frequent orders, and stronger user stickiness. However, the flow is tilted towards Taobao merchants and benefit consumers. On the one hand, the take rate decreases, and the growth in GMV cannot be fully transmitted to income.
However, from another perspective, the increase in subsidies/investments has further eroded profit growth. Taotian Group's adj.ebita this quarter fell by about 1.4% year-on-year., with cmr slightly exceeding expectations, profits fell. The magnitude is exactly the same as expected. In other words, investment has eroded profits more seriously than expected.
Since the cycle of bottoming out and adjustment will most likely not end within a few quarters, Taotian’s performance will most likely not be very good in the short to medium term. The decisive point is also whether Taotian can maintain strong growth after subsequently reducing investment and traffic support.
3. The asset-heavy self-operated business continues to shrink and improve efficiency, and 1688.com has a second spring.
After previously adjusting the structure and financial report caliber, the current self-operated retail only retains core online self-operated businesses such as Tmall Supermarket and Tmall International. business. In this quarter, Taotian's self-operated retail sales, including Tmall Supermarket and Tmall International, experienced a negative growth of 2.1% year-on-year. As we previously expected, the new management is not very enthusiastic about asset-heavy business during the stage of sorting out high-quality assets. Therefore, the asset-heavy self-operated business is also in the stage of shrinking and improving efficiency.
As for the oldest 1688.com business, as a main foothold of Taotian's "cost-effective" strategy, it is positioned to slowly transform into 2c and has a certain linkage with temu in terms of supply. This quarter's revenue increased by 19.8% year-on-year, maintaining a good performance. The growth rate
Fourth, flex its muscles overseas, with revenue and losses higher than expected
Compared with the involution of domestic e-commerce, cross-border overseas expansion has been one of the consensuses of domestic Internet companies since 2023. During the last quarter's results meeting, the company made it clear that it would invest aggressively and grow even if its losses significantly expanded.
On the actual answer sheet, the magnitude of growth and loss was greater than expected. This quarter, international business still achieved a high growth of 45% in overall revenue, which was 7% higher than expected. Among them, the international retail business, which has attracted more attention, has a year-on-year growth rate of 56%. It is reported that the full/semi-hosted model of Choice has accounted for 70% of AliExpress’s order volume, which shows the determination and progress of comprehensive transformation.
Among other business segments, Turkish e-commerce trendyol has maintained double-digit order growth. As for Southeast Asia’s local e-commerce company Lazada, its current focus is on improving profits and has significantly reduced its average loss per order.
The cross-border wholesale business alibaba.com, which is mainly for the B-side, has grown relatively, with a year-on-year growth rate of 11% this quarter. On the one hand, the current c-end and full/half managed business is the focus of international groups, and traffic will inevitably tilt from 2b to 2c. On the other hand, compared with the efficient performance time of full/half hosting, alibaba.com still has the timeliness of performance by merchants themselves. In the cross-border e-commerce environment where "every day advances, one step is lost", it no longer has much competitiveness.
However, after peeling off the impact of the transition to full hosting on revenue, it reflects that the actual overall international business order growth rate this quarter is 20%. As the base increases, the growth is declining.
From a profit perspective, International Business Group’s operating loss (adj. ebita) excluding equity incentive expenses and amortization expenses soared to 4.1 billion, and the loss rate widened 4% month-on-month to 15%, which was higher than the expected loss of 3.8 billion.
However, in the stage of accelerating customer acquisition and seizing the market, we believe that "temporary" losses are acceptable. On the one hand, product promotion and customer acquisition mean a lot of investment. On the other hand, in order to achieve the full/version hosting model and efficient contract fulfillment, a large amount of investment in warehousing and equipment is required. Therefore, as long as the growth rate does not collapse, the expansion of losses is not a problem that needs to be particularly entangled. More importantly, after a few quarters of investment, after the international group has rapidly expanded its scale and market, it can quickly narrow its losses and even turn losses into profits as soon as possible.
5. Cainiao continued to lend to Haidongfeng, but it also turned a loss despite high investment.
After the reorganization, Cainiao’s current revenue includes the group’s internal revenue and external customer revenue, which totaled 24.6 billion yuan this quarter, and the year-on-year growth rate further increased to Nearly 30%, nearly 11% higher than market expectations. The current rookie mentality is closely related to overseas business. The warehousing and logistics services required behind the rapid growth of cross-border business are the direct beneficiaries of Cainiao, a brother company. As international business exceeds expectations, so does Rookie.
However, because Alibaba is increasingly emphasizing the timeliness of cross-border delivery (5-day, 10-day delivery, etc.), Cainiao's operating costs and capital have also begun to exert significant pressure. Cainiao's loss (adj.ebita) this quarter also reached 1.34 billion. Although the seller's latest expectations also believe that Cainiao will turn a loss, the actual extent is higher than expected.
6. Throw away the garbage project, Alibaba Cloud’s growth rate and profit are both accelerated
Alibaba Cloud business, the second pillar of Alibaba Group’s market value, also includes the income generated within the group in the revenue calculus after the reorganization. Alibaba Cloud Group achieved revenue of 25.6 billion this quarter, with year-on-year growth continuing to improve slightly to 3.4%. Actual revenue was about 2% higher than expected.
Although the absolute growth rate is still not high, the market growth rate can still improve if Alibaba actively abandons low-quality private/hybrid cloud business. In contrast, the revenue growth rate of public cloud products has reached double digits.
At the same time, adjusted ebita profit this quarter reached 1.4 billion, 3.4% higher than expected. After getting rid of low-quality projects, both growth and profits improved, showing a good medium-term prospect.
7. Local service losses also expanded
Under the relatively low-tech situation that just emerged from the epidemic last year, Alibaba’s local service revenue increased by 18.5%, which is still a good performance. However, the single-quarter loss also expanded to 3.2 billion, which was nearly 11% lower than expected.
8. Entertainment is really a "weighing weight", and other "n" companies are also suffering from expanding losses.
If the losses of several high-quality direct line businesses mentioned above expand, it may be necessary to increase investment in order to regain growth. Such big entertainment and other "n" companies do not have high priority within the Alibaba Group. They should divest more "ineffective" assets to reduce costs and increase efficiency for the group. However, the performance this quarter was not satisfactory, and the actual ebita losses were higher than expected.
Among them, the major entertainment sector saw revenue shrink by 1% year-on-year, but its losses continued to expand to 900 million. Both the revenue and profit side of were significantly lower than expected.
9. Alibaba is undergoing change, and the cost of improved growth is an overall worsening of losses
Looking at the group as a whole, although there are no surprises in Taotian's business income, cmr growth is accelerating after all. At the same time, with the strong growth of the "cross-border twins" of International Business + Rookie, and the slightly stronger-than-expected growth of Cloud Group and Local Life, the group's overall revenue this quarter was slightly more than expected by nearly 2 billion. The acceleration in revenue deserves recognition. .
However, in terms of profits, Taotian Group’s adj.ebita, which accounts for the majority, has experienced negative growth, which basically sets the tone that the overall profits of the group will not look good. In other sectors, except for the Intelligent Cloud Group's profit margin, which showed an improving trend, the profits of other sub-groups basically deteriorated across the board ('s figure below clearly shows that the profit margin generally shows a 45-degree downward angle).In terms of the actual loss amount of
, except Taotian and Alibaba Cloud, which has improved, the total ebita loss of all other sectors increased from 9.5 billion last year to 12.3 billion, a loss increase of nearly 30%.
Overall, Alibaba Group's adjusted operating profit before amortization (ebita) this quarter was approximately 24 billion, which was nearly 2 billion less than market expectations, and was obviously lower than expected. It can be seen that in order to regain the share and growth of , Alibaba's business groups have paid a high price.
10. How do expenses change? How do costs and expenses change after reading the revenue and profits of Huahua and the province? First of all, Alibaba's gross profit margin after excluding equity incentives this quarter was 33.7%. As Alibaba gradually marginalized and abandoned low-quality assets/business, the gross profit margin decreased by approximately 0.3pct year-on-year. It can only be the result of Ali cutting prices and increasing investment.
In terms of expenses, excluding the three fees for equity incentives, after Alibaba announced that it had re-entered the investment period, marketing expenses increased by nearly 4 billion year-on-year, and R&D expenses also increased by about 1.1 billion. It can be seen that Alibaba is indeed not stingy when it comes to expenses to promote growth. Compared with , the internal management expenses of only increased by 200 million. It can be seen that Alibaba is still saving on internal expenses. The obvious positive correlation between the increase in costs and its impact on revenue demonstrates the company's choice to spend money wisely.
