Alibaba delivered strong 4QFY20 results, with revenue/non-GAAP net profit +22% YoY/+11% YoY, 7%/36% above consensus. Mgmt guided FY21E rev at >RMB650bn, +27.5% YoY (in line with consensus). Recovery path was better than expected, QTD GMV has recovered to 4Q19 level and seen obvious rebound since Apr. We slightly raised its adj. net profit by 4.9%/2.4% in FY21/22E. Maintain BUY with new SOTP-based TP up to US$251.6 (30x FY21E P/E).
- 4QFY20 beat, with FY21E rev guided +27.5% YoY. 4QFY20 revenue grew 22% YoY, 7% above consensus. Non-GAAP net profit +11% YoY, 36% above consensus. We view its positive core commerce growth is better-than-feared, and margin improvement saw upside surprise.
- Better-than-expected ecommerce recovery. 4QFY20 OMS revenue grew 1% YoY, above our estimates. Customer management rev (CMR) +3% YoY while commission rev -2% YoY. Tmall physical GMV growth came in at 10%, mainly on strong FMCG and consumer electronics (+20% YoY in 1Q, +30% QTD). QTD GMV has recovered to 4Q19 level, and seen obvious rebound since Apr, especially for apparel and home appliance. BABA would continuously strengthen its lower-tier cities penetration, with diversified products offerings, livestreaming, and partner cooperation. Mgmt stated preferential take rate to continue, coupled with waiving annual fee, instead of free traffic to merchants. Given SME's operation pressure, we expect prudent monetization enhancement ahead, but keep positive on its long-term upside from feeds monetization and innovations.
- Structural opportunities ahead. Cloud surged 58% YoY in 4QFY20, higher than peers. We expect Alibaba to benefit from structural opportunities, including cloud business (e.g. DingTalk, online education). 2020 could be Alibaba’s another investment year on lower-tier cities penetration, merchants support, cloud business and local services.
- Maintain BUY. We think Alibaba is well positioned to capture online consumption recovery and long term benefit from structural opportunities. We raised our earnings by 4.9%/2.4% in FY21/22E, and lifted SOTP-based TP from US$229.8 to US$251.6 (30x FY21E P/E, rolling over to FY21E multiple). Further catalysts: 1) decent ecommerce recovery; 2) potential stock connect & Ant Financial listing; and 3) structural opportunities.
