Huachuang Securities: Maintaining Alibaba-W (09988) “Recommended” Rating Target Price of HK$173.86

The Zhitong Finance App learned that Huachuang Securities released a research report stating that it maintains the Alibaba-W (09988) “recommended” rating, with a target price of HK$173.86 (exchange rate of 1 HKD=0.91 CNY). Considering the rapid growth in immediate retail revenue and the impact of synergy, the bank adjusted the company's FY26-28 revenue forecast to 11078/12499/1369.9 billion yuan respectively, up 11%/13%/10% year-on-year. At the same time, considering the intensity of short-term instant retail competition and the possibility that continued e-commerce and takeout subsidies may have a certain impact on profits, the adjusted net profit forecast for the company's FY26-28 was 1315/1491/1940 billion yuan, an increase of -17%/13%/30% over the previous year.

Incident: Alibaba announced FY26Q1 results. Revenue of 247.65 billion yuan, YOY +2%. If the revenue contributed by Gaoxin Retail and Yintai's disposed business is excluded, YOY +10% is the same caliber. Adjusted EBITA of 38.84 billion yuan, YOY -14%, and EBITA margin of 16% (14% in the previous quarter). FY26Q1 capital expenditure was 38.7 billion yuan, compared to 24.6 billion yuan in the previous quarter.

The main views of Huachuang Securities are as follows:

The FY26Q1 financial report re-summarizes the four major departments, and the “1+6+N” structure is history

By business, look at revenue and profit: 1. E-commerce in China: Revenue YOY +9.7% (instant retail integration in this quarter), of which CMR (customer management revenue) YOY +10.1%, is an increase in basic software service fees added in September last year and an increase in the penetration rate of “full-site promotion”. Furthermore, management believes that these two factors, combined with instant retail to increase the number of users and frequency of purchases, will also have a positive impact on CMR. Instant retail YOY +12.0%; China's e-commerce business adjusted EBITA YOY -21%, mainly due to large investment in instant retail. 2. International business: Revenue YOY +19%, adjusted EBITA loss of 59 million, significant loss reduction. 3. Cloud business: revenue YOY +26%, adjusted EBITA yoy +26%, EBITA margin 8.8%. It is mainly driven by revenue growth in public cloud services, including an increase in the adoption of AI-related products.

One of the highlights of the FY26Q1 financial report is the cloud business, or the possibility that the market will see an increase in the growth slope of cloud revenue

FY26Q1 cloud growth rate is +26% (Q1 +18%), and AI revenue accounts for more than 20% of external commercialization revenue; FY26Q1 Group invested 38.7 billion yuan in capital expenditure (24.6 billion yuan in the previous quarter), continuing to strengthen expectations that the cloud growth rate will continue to rise. In addition, during the conference call, management also mentioned that “adhering to the three-year investment plan of 380 billion dollars” will further strengthen the market's confidence in Alibaba Cloud's development.

In the instant retail sector that the market is concerned about, management has also given the “scale drives efficiency” business target this time to achieve

① Operating side: Average daily orders peaked at 120 million, 80 million orders per week in August; ② User side: Immediate retail monthly transaction buyers reached 300 million, an increase of 200% over April; ③ Merchant side: Over 50,000 Lightning warehouses, of which 25% of the supply of Lightning warehouses comes from Ali Ecological Supply Chain; ④ Riders side: The average number of active riders per day in August reached 2 million (300% increase compared to April). Previously, the market was worried that “the subsidy will return to zero once the subsidy stops,” but this time the management has given a goal of digesting the doubts from near to far. ① Short-term: It is expected that the average UE for instant retail orders can be reduced by half while maintaining consumers' current preferential investment. ② Mid-term: Taobao's instant retail is expected to add 1 trillion GMV in the next 3 years. ③ Long-term: Ali is optimistic about the combination of near and far: Maosheng, Hema, and the supply of millions of brands entering instant retail, etc.

International digital commerce drastically reduced losses

AIDC's revenue for the quarter increased 19% year over year. Adjusted EBITA loss was $59 million, a sharp reduction in losses. The economic efficiency of AliExpress Choice units continues to improve. Through deep collaboration with local merchants and partners, combined with AI tools, the efficiency of marketing, procurement and product listing is improved, and diversified monetization paths are formed.