CITIC Securities: Maintains "Strong Buy" rating on Alibaba-W with a target price of HKD 199

According to the Zhitong Finance APP, China Merchants Securities has released a research report stating that it is optimistic about Alibaba-W (09988) maintaining a solid competitive edge in its e-commerce core business, the growth potential of its in-store and home delivery services, as well as the long-term growth potential of its cloud and AI businesses. Considering the company's short-term increase in investment in instant retail and new in-store businesses, it is expected that the Non-GAAP net profit attributable to the parent company for FY2026-2028 will be RMB 101.3 billion, 155.5 billion, and 203.4 billion respectively. The report assigns a 12x PE for the net profit of the e-commerce core business and a 10x PS for the cloud business, corresponding to a target price of HKD 199 per share, maintaining a "strong buy" rating.

Key points from China Merchants Securities are as follows:

E-commerce core business competitiveness is solid, with site-wide promotion driving steady improvement in monetization rate

Alibaba's e-commerce core business has remained robust, with GMV steadily growing in line with the overall trend of online retail. The CMR is expected to maintain a steady year-on-year growth rate driven by the continuous increase in site-wide promotion penetration and the rapid growth of flash purchase services, with the monetization rate continuing to improve year-on-year. On the profit side, the traditional e-commerce business is expected to restore a steady growth trend driven by an improved competitive landscape and a significant acceleration in revenue growth compared to the same period last year.

Instant retail for takeout: Continued investment, optimistic about future profit improvement potential

Taobao's flash purchase service has further developed rapidly in the September quarter compared to the June quarter, with an average of 80 million orders per Sunday in August. Although the order volume in September showed seasonal fluctuations, the market share remained relatively stable. In terms of losses, the investment in the September quarter has increased compared to the June quarter. In the future, with factors such as decreasing customer acquisition costs, an increase in the proportion of high-value orders, and cost optimization brought about by economies of scale, UE is expected to continue to improve, and there is optimism about the future development space and profit improvement potential of the instant retail business.

In-store group buying: Gaode launches street scanning list, optimistic about future growth potential of in-store business

Gaode launched the street scanning list on September 10, as the world's first list based on user behavior, formed through real navigation/search/arrival/collection behavior data and Alipay credit data, aiming to reconstruct the offline service credit system. As of October 3, the street scanning list had over 400 million users in just 23 days since its launch. According to Questmobile, Gaode Map's MAU is expected to reach 890 million by August 2025, indicating that the penetration rate of street scanning list users within the app is close to 50%. At the same time, the platform has issued RMB 200 million in taxi vouchers and RMB 950 million in consumption vouchers to reduce users' in-store costs. In the future, with the large-scale traffic entry from Gaode and the company's subsidy investments, there is vast growth potential for the business.

Cloud and AI: Revenue continues to accelerate, optimistic about business growth potential and long-term profit space driven by AI

Alibaba Cloud's business revenue is driven by the continuous high-speed growth of customer AI demand, maintaining an accelerating growth trend in recent quarters. It is expected that the growth rate of cloud revenue will also maintain an upward trajectory in the subsequent quarters. In terms of capital expenditure, Alibaba Cloud stated at the Cloud Habitat Conference that it will actively promote the construction of AI infrastructure worth RMB 380 billion and plans to increase investment further. In the long term, Alibaba Cloud possesses the largest cloud infrastructure in the country, advanced large models, and strong self-developed computing power. As a leader in domestic cloud computing, its competitive advantage in the AI era is further highlighted, and there is optimism about the future growth potential of cloud business and long-term profit space driven by AI