Alibaba-SW Financial Report Preview: E-commerce sector gradually recovering, institutions expect profits to decline

According to the Zhitong Finance and Economics APP, Alibaba-SW (09988) will announce its financial performance on May 13th. Since April, benefiting from the continuous rise of the Hong Kong stock market, Alibaba's stock price has rebounded by over 10%. Institutions generally expect Alibaba to achieve a revenue of RMB 219.832 billion in the latest quarter, a year-on-year increase of 5.58%. Adjusted EBITA is expected to decrease year-on-year, with earnings per share decreasing by 39.88% to RMB 5.41.

For this financial report, investors are mainly focusing on the effectiveness of Alibaba's low-price strategy in driving e-commerce GMV growth, changes in the gap of managing Chinese retail business customers, ways to increase shareholder returns, company share repurchases, and dividend guidance. The low-price strategy is beginning to show results, with Taotian Group's GMV growth rate recovering.

Many institutions generally predict that due to the gradual recovery of e-commerce and the company's continued efforts in pricing power and optimizing user experience strategies, Alibaba's online GMV is expected to achieve healthy growth this quarter, with the core business value remaining solid. In addition, Alibaba's international business and cloud services continue to exert strong efforts and have significant growth potential.

From a macro perspective, the first quarter saw a good recovery in consumer retail, reaching 123% of the same period in 2019. Data from the National Bureau of Statistics shows that the total retail sales of consumer goods in the first three months reached RMB 12.0327 trillion, a year-on-year increase of 4.7%; online retail sales nationwide reached RMB 3.3082 trillion, a year-on-year increase of 12.4%. In addition, in the logistics sector, China's express delivery business volume grew by 25.2% year-on-year in the first quarter.

Analysts Wang Weina and Yao Jing from Huachuang Securities previously released a report showing that in terms of GMV growth rates of major e-commerce platforms in the first quarter, Alibaba's Taotian, JD.com, and Pinduoduo had growth rates of 15%, 29%, and 21% respectively. In contrast, the GMV growth rates of the two major live e-commerce platforms Douyin and Kuaishou were 45% and 38% respectively, much higher than traditional e-commerce.

Zhongjin also believes that thanks to the company's strategic direction of "prioritizing scale and market share" and the good performance of online consumption since the beginning of the year, Alibaba's GMV growth rate this quarter is gradually catching up with the year-on-year growth rate of online retail sales, expected to increase by 6%, while Customer Management Revenue (CMR) is expected to grow by 3.5% year-on-year.

In other aspects, due to the continued high growth of AliExpress, the accelerated preparation of the billion-dollar subsidy brand's overseas expansion plan, Alibaba's international retail revenue this quarter is expected to increase by about 45% to RMB 20.5 billion, with an adjusted EBITA loss of approximately RMB 4.1 billion; Alibaba Cloud revenue is expected to increase by 4% to RMB 25.7 billion, with an adjusted EBITA of approximately RMB 1.6 billion.

Guohai Securities also predicts that Alibaba's revenue in the first quarter of this year may reach RMB 219.8 billion, a year-on-year increase of 6%, but adjusted EBITA is expected to decrease by 2% to RMB 24.8 billion.

It is worth noting that as of the financial year ending March 31, 2024, Alibaba has repurchased a total of 1.249 billion common shares (equivalent to 156 million American depositary shares) at a total price of USD 12.5 billion, becoming the Chinese internet company with the largest buyback effort in the past fiscal yearCurrently, Alibaba's share repurchase plan still has a remaining repurchase amount of USD 31.9 billion, valid until March 2027. The company continues to enhance shareholder returns, which is expected to further improve market sentiment.

CMB International pointed out that despite the pressure on profit margin expansion due to increased investment in business, the bank remains optimistic about Alibaba's long-term growth potential. Alibaba is committed to improving shareholder returns by reducing losses in non-core businesses, strengthening stock repurchases, and increasing dividend payments, providing support for short-term valuations. Measures to promote the synergy of the group's integrated business strategy may provide long-term value