China Merchants Securities highlighted in a report that Alibaba (BABA.US) 's revenue rose 7% YoY to RMB222 billion in the quarter ended March, beating forecasts by 1%.
Taobao Tmall Group's revenue grew 4% YoY, with double-digit growth in GMV. The difference between the growth rate of GMV and that of revenue was due to an increase in Taobao's share of GMV. International business and Cainiao continued to record strong revenue growth, up 45% and 30% YoY respectively. Gross profit increased by 6% YoY, with gross margin at 33%, flat YoY. Adjusted EBITA profit fell 5%, while net profit dropped 9%, 3% below expectations.
The report quoted Alibaba's management as saying that FY25 will be a year of refocusing, optimising and investing. The company will increase its investment in Taobao Tmall Group to enhance competitiveness and improve user experience, and to select high-quality products while maintaining its low price advantage. In addition, long-term investments in cloud business and AI, domestic and overseas e-commerce will take time to show results.
CMS found Alibaba's current valuation attractive and believed that the company could provide a shareholder return of about 8% in the short term by holding its shares while waiting for the restructuring investment to bring new business growth. The broker slightly lowered its profit forecast, mainly to reflect the higher investment required for the international e-commerce expansion.
CMS raised Alibaba's target price to US$124 from US$118 and maintained its Overweight rating.
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