Alibaba delivered solid 1QFY21 results, with revenue/Non GAAP net profit +34% YoY/+28% YoY, 4%/9% above consensus. We reiterate our confidence on BABA’s secular growth, backed by livestreaming initiatives, Taobao deals penetration and overseas opportunity. We keep our forecast unchanged, with SOTP-based TP of HK$290. Valuation at 23x FY22E P/E is not demanding, with further catalysts to come (e.g. investor day on 28-30 Sep, potential stock connect).
- 1QFY21 beat. Alibaba released upbeat 1QFY21, with revenue/Non GAAP net profit +34% YoY/+28% YoY, 4%/9% above consensus. By segment, ecommerce/ Cloud/ DME grew at 34%/59%/9% YoY. Adj. EBITA margin came in at 30% (vs. our estimate of 27%), mainly on improving ecommerce profitability and DME narrowing loss margin.
- Decent recovery with multi-engine approach. 1QFY21 OMS revenue grew 21% YoY, slightly above our estimate of 20%. Customer management rev (CMR) +23% YoY while commission rev +17% YoY (vs. our estimate of 22%/17%). BABA's GMV has fully recovered, with 618 promotions and enhanced feeds monetization. Noted that China online sales in Jul still grew 24.5% YoY, suggesting strong momentum post festival. Looking ahead, we expect core commerce to see multiple engines, backed by: 1) Taobao deals <淘宝特价版> to continuously strengthen its lower-tier cities penetration; 2) live streaming initiatives to stimulate engagement (GMV doubled YoY in 1QFY21); 3) international business (e.g. Lazada) to benefit from global COVID-19, by leveraging its tech edge and well-positioned supply chain. Regarding geographic risks, we expect limited impact from India & US issues, for < 2% rev contribution in our estimate.
- Cloud & Ant still undervalued. BABA’s cloud surged 59% YoY in 1QFY20, with long-term beneficiary from COVID-19. Given its higher growth and TAM, we think AliCloud is still undervalued (8x FY22E P/S) at 30% discount of AWS. On top of that, we believe potential stock connect & Ant Financial listing ahead would unlock its group valuation.
- Maintain BUY. We think BABA is well positioned to capture online consumption recovery and long term benefit from structural opportunities. We keep our forecast unchanged, with SOTP-based TP of HK$290 (26.5x FY22E P/E).
