CCB International: Lowers Alibaba-W (09988) target price to HK$169.1 to maintain “outperforming the market” rating

The Zhitong Finance App learned that CCB International released a research report stating that it raised Alibaba-W (09988) earnings estimates for fiscal year 2025 by 0.1%, while lowering its earnings estimates for the 2026-2027 fiscal year by 0.2% and 0.4%, respectively. Based on the SOTP valuation, the Group's target price for Hong Kong stocks was lowered by 1.3% from HK$171.3 to HK$169.1, keeping the “outperforming the market” rating unchanged.

The bank's latest forecast is that revenue for the fourth fiscal quarter of fiscal year 2025 increased 6.5% year on year to 236 billion yuan, adjusted EBITA increased 34% year on year to 32.2 billion yuan, adjusted EBITA profit margin increased 2.8 percentage points year on year to 13.6% year on year, and adjusted net profit was 31 billion yuan. On the Taobao Tmall Group's side, benefiting from an 8.1% CMR increase, the bank expects its revenue to increase 5.5% year-on-year to RMB 98 billion in the fourth fiscal quarter. At the same time, it is anticipated that customer management revenue (CMR) will continue to exceed the growth of total commodity transactions (GMV). In terms of profit margins, due to slowing competition and the Group's stricter sales and marketing expenses, the bank expects Taobao Tmall Group (TTG) to increase 2.4% to 39.4 billion yuan in adjusted EBITA. The adjusted EBITA margin is 40.1%, down 1.2 percentage points from the same period last year.

Additionally, due to strong external demand driven by DeepSeek, the bank expects Alibaba's cloud revenue to accelerate to 18% in the fourth fiscal quarter of 2025 from 13% in the previous quarter. The increase in AI capital expenditure will cause depreciation to accelerate, but the bank said it still believes that improvements in operational efficiency will be a mitigating factor, and the impact on profit margins is manageable. As a result, the bank predicts that the adjusted EBITA profit margin for the Group's cloud business in the fiscal quarter will be 9%, down 9.9% from the previous fiscal quarter.