With FY20E financial guidance unchanged, mgmt. emphasized on lower-tier cities penetration, synergies and efficiency gains in Alibaba 2019 Investor Day. We are positive to see its robust user metrics, stronger focus on synergies and efficiency gains, with 5-year goal of RMB10tn+ GMV from 1bn+ annual active customers. Maintain BUY with TP and earnings unchanged.
- FY20E topline guidance unchanged. We attended Alibaba 2019 Investor Day, where mgmt. emphasized on lower-tier cities penetration, synergies and efficiency gains. Mgmt maintained its FY20E revenue guidance (over RMB500bn, 33%+ YoY), and aimed to achieve RMB10tn+ GMV from 1bn+ annual active customers in 5 years. We still keep confident on Alibaba’s secular growth driven by robust core commerce and ecosystem synergies with continuous investments.
- 33% Ant Financial acquisition to complete. Ali announced the acquisition of 33% stake in Ant Financial to complete on the investor day. After that, Alibaba will take 33% of Ant’s after-tax income from 37.5% profit sharing, with little financial impact from this transaction. As the global leader in digital finance, Ant financial will leverage its huge user scale (e.g. 900mn Alipay AAU in China), production innovation and cutting-edge technology to fuel strong consumer adoption.
- Key themes: low-tier cities penetration, synergies and efficiency gains. Alibaba grouped Taobao and Tmall to elaborate the marketplace growth at scale, backed by solid user metrics (e.g. DAU acceleration). Ali emphasized lower-tier cities penetration, with consumers from less-developed areas accounting for 70% of net adds. We are impressed by its 40% user penetration in less-developed countries and new consumers ARPU of over RMB2,000 there in FY18&19, suggesting still ample room for its user expansion and ARPU improvement. Besides, we expect more cross-selling opportunities and ecosystem synergies to unlock its growth potential with stronger user loyalty.
- Maintain BUY. We kept our financial forecasts unchanged, with SOTP-based TP of US$224.1 (26x FY21E P/E). We view Alibaba as our top pick, backed by solid earnings growth and reasonable valuation. Further potential catalysts: 1) dual listing in HK; and 2) ecosystem synergies.
