CICC: Maintaining Alibaba-W (09988) performance over the industry rating target price of HK$147

The Zhitong Finance App learned that CICC released a research report saying that currently Alibaba-W (09988, BABA.US) Hong Kong stocks and US stocks are trading at 16/18 times FY26 and 13/15 times the non-standard price-earnings ratio of FY27. FY26's revenue was lowered by 3% to 1,0683 billion yuan, due to the influence of Gaoxin Retail and Yintai, which lowered FY26's non-generic standard net profit by 29% to 121.8 billion yuan, mainly due to increased investment in Taobao flash sales; the bank introduced FY27 revenue and profit forecasts of 125.1 billion yuan and 149.3 billion yuan to switch Ali's valuation to segmented valuation and switched the valuation to FY27, based on e-commerce business 13x P/E and cloud computing business 3.5x P/S, mainly due to e-commerce and cloud computing business having adjusted independent profit and valuation centers in the US Stock and Hong Kong stock targets The prices are 151 US dollars and 147 Hong Kong dollars, up 35% from the previous target price, maintaining an outperforming industry rating. Compared with current Hong Kong stocks and US stocks, there is 27% and 12% room to rise.

CICC's main views are as follows:

1QFY26 revenue and adjusted EBITA fall short of market expectations

The company announced 1QFY26 (2Q25) results: revenue increased 1.8% to 247.7 billion yuan, and the comparable caliber increased 10% after excluding the influence of Gaoxin Retail and Yintai; adjusted EBITA fell 13.7% year-on-year to 38.8 billion yuan, mainly due to increased investment in Taobao flash sales, which was partially offset by losses in international business.

Cloud computing capital expenses are rising, and revenue growth is accelerating

1QFY26 cloud revenue also increased 25.8%, and external customer revenue also increased 26%, mainly driven by public cloud and AI. AI-related revenue accounted for more than 20% of external customer revenue for the first time, and AI also drove the rapid growth of traditional computing and storage products. The 1QFY26 cloud business had an EBITA of 2.95 billion yuan, corresponding to a profit margin of 8.8%. It was mainly due to the increase in scale and efficiency of public clouds, partly offset by additional investment. Capital expenditure rose to 38.6 billion yuan this quarter, and the impact of supply chain disruptions was limited. The company maintained a three-year investment guideline of 380 billion yuan. The bank expects supply restrictions to ease as investment increases. Ali has leading open source model capabilities and a complete AI ecosystem, which is expected to drive rapid AI business growth, thus achieving a year-on-year increase in cloud computing revenue growth and an increase in cloud valuation.

The volume of Taobao flash sales has risen sharply, and losses are expected to peak in July

In August '25, the number of monthly active buyers in instant retail reached 300 million. Taobao's monthly active buyers also increased by 25%, and the average number of daily orders reached 80 million, achieving the goal of user scale and user awareness building. In terms of operating efficiency, short-term UE losses are large. The bank expects a peak UE loss in July, and UE will improve month by month through capacity optimization, efficiency improvement, and user and order structure optimization. After September, UE losses are expected to be narrower by half compared to July. The bank estimates that 1QFY26 and 2QFY26 Taobao flash EBITA losses were 11.2 billion yuan and 316 billion yuan, corresponding to an average loss of 3.3 yuan and 4.7 yuan for the entire fiscal year.

E-commerce continues to focus on core users and merchants to observe flash shopping collaboration trends

1QFY26's customer management revenue (CMR) also increased by 10%. The bank estimates that Taotian GMV also increased by 5%, mainly driven by software technology service fees and increased advertising penetration across the site. Even with high base factors, the bank predicts that CMR is expected to maintain high single-digit to double-digit year-on-year growth in the next few quarters, mainly due to the flash sales business's effective driving traffic, thereby boosting advertising revenue. The positive contribution of flash sales to the year-on-year growth rate of CMR is expected to be 2 percentage points in the next 3 quarters, but the drive for GMV still needs to be observed.

Risk warning: Macroeconomic and regulatory uncertainties, competition exacerbate risks.