CGS-CIMB Research analysts Lei Yang and Hang Xu are keeping “add” on Alibaba Group after the group’s revenue for the 4QFY2022 ended March and non-GAAP net profit stood within expectations.
GAAP stands for generally accepted accounting principles.
On May 26, Alibaba reported 4QFY2022 revenue of RMB204 billion ($41.8 billion), up 9% y-o-y.
Non-GAAP net profit for the 4QFY2022 fell 24% y-o-y to RMB19.8 billion.
In its results release, the group reported 15.6% higher annual active consumers (AACs) at the end of the FY2022 ended March of 1.31 billion.
Despite the positive recommendation, Lei and Hang have lowered their target price estimate on the counter to HK$151 ($26.30) from HK$170 previously.
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The group has estimated a conservative top-line outlook for the 2QFY2023 as the cities hit by the Covid-19 Omicron outbreaks represent half of the group’s gross merchandise value (GMV).
To this end, Lei and Hang are expecting Alibaba to post a 5% y-o-y decline in its revenue for the 1QFY2023.
The analysts also expect the group’s non-GAAP net profit to drop by 30% y-o-y in the same quarter.
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“Net profit y-o-y growth should start to recover in 2QFY2023, along with the consumption recovery and Alibaba’s cost-cutting measures,” they write in their May 27 report.
Lei and Hang are also reducing their earnings per share (EPS) estimates for the FY2023 and FY2024 by 10.1% and 9.0% respectively to reflect the group’s potentially slower revenue growth and margin pressures.
“But we still believe Alibaba’s new initiatives, such as Taobao Deals, Taocaicai, AliCloud, international business, Cainiao and local retail business, will bear fruit in the future,” they write.
In their view, short-term catalysts for the group include a robust growth in its user base, synergies in the Alibaba retail ecosystem, fast growth in its international retail business, such as Lazada, and returns from industrial digitalisation with its cloud computing service offerings.
On the other hand, key risks include more intense competition in the domestic e-commerce market, global political issues, and a negative impact from any new stricter regulations.
DBS Group Research analysts Tam Tsz Wang and Lilian Lv are also keeping their “buy” calls on Alibaba Group’s listings both in Hong Kong and the US.
Like their counterparts at CGS-CIMB, Tam and Lv have reduced their target prices on both of the group’s listings.
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Tam and Lv have lowered the group’s HK target price to HK$157 from HK$182 previously, while its US-listed counter has received a target price estimate of US$161 ($220.06), down from the previous estimate of US$187.
According to the analysts at DBS, the new target price pegs Alibaba’s core commerce earnings at HK$122, with an FY2023 P/E of 15x. Its cloud segment is pegged at a valuation of HK$24 with 5x price-to-sales on the FY2023. Finally, the group’s digital media and entertainment has been pegged at a valuation of HK$9.
Following its results, the analysts are upbeat on the group’s earnings growth prospects as they believe the group will focus more on optimising costs and slowing its investment pace amid the weak macro environment.
“Our non-GAAP net profit for FY2023 and FY2024 is 3% and 1% higher than consensus,” they write in their May 27 report.
As at May 31, shares in Alibaba closed HK$1.35 higher or 1.42% up at HK$96.25. Shares in NYSE-listed Alibaba closed US$1.07 lower or 1.13% down at US$93.41 on May 27.
