Caitong Securities: Initiates "Buy" rating on Alibaba-W, collaborating on and off-line to create a new growth curve for e-commerce

According to the Zhitong Finance APP, Caitong Securities has released a research report stating that Alibaba-W (09988), as a leading domestic e-commerce and cloud computing enterprise, is consolidating its competitive advantage driven by AI at its core, opening up long-term growth space. The firm expects the company to achieve operating revenues of 1,034.6 billion / 1,129.3 billion / 1,254.8 billion yuan for the fiscal years 2026-2028, and Non-GAAP net profit attributable to the parent company of 97.5 billion / 164 billion / 197.7 billion yuan. This is the first coverage, and a "Buy" rating is given.

Key points from Caitong Securities are as follows:

Diversified expansion shifts to strategic focus on core business

Starting from e-commerce, Alibaba has diversified its development and now covers multiple fields including cloud computing, international retail, and mobile internet. In response to changes in the consumption environment and market competition, the company's strategic focus has shifted from diversified expansion back to concentrating on core business, continuously enhancing competitiveness. Looking ahead, the company will increase its investment in cloud and AI infrastructure (with a cumulative investment exceeding 380 billion yuan from fiscal years 2025-2027), accelerating the deep application and industrialization of AI technology in core scenarios such as e-commerce and cloud computing, further consolidating technological barriers, and exploring new growth curves driven by AI.

Synergy between near and far fields to create a new growth curve for e-commerce

The company structure has been reorganized into four major departments, integrating Ele.me and Taobao Flash Purchase into the instant retail business and incorporating it into the China e-commerce group. A key change in this adjustment is the "e-commerce" integration of local life services, where instant retail effectively complements far-field e-commerce. Taobao Flash Purchase will become a core user engagement engine that drives high-frequency interactions to low-frequency ones. The structural adjustment will maximize business synergy effects, creating more revenue increments in the long term. The firm expects that cross-selling from instant retail will have a positive impact of 2-3% on 3Q2025 CMR revenue, with a long-term contribution expected to be 5-10%; short-term profit fluctuations are inevitable, but the overall trend of loss reduction is relatively certain.

AI reshapes cloud valuation, significant advantages in full-stack services

AI brings a new round of technological cycles for Hang Seng Technology, with leading cloud vendors having significant first-mover advantages based on their strengths in capital, data, application scenarios, and engineers. The firm believes that driven by the continuously growing demand for AI, the revenue growth of cloud business will continue to accelerate. Alibaba Cloud's full-stack layout advantage of "underlying AI infrastructure + Tongyi large model series/model platform + upper-layer applications and industry solutions" creates a closed loop of "computing power + algorithms + application scenarios," giving its AI PaaS service a higher bargaining power than basic computing power leasing, with the profit potential of AI + cloud poised for takeoff.

Risk warnings: Risks of intensified competition in the e-commerce industry, risks of instant retail business loss reduction not meeting expectations, risks of organizational structure adjustment effects not meeting expectations, risks of AI + cloud business growth not meeting expectations, and risks in overseas markets, etc