Alibaba Q&A Q2 FY22: weak guidance and multi-engine growth strategy
Q&A is a session under a company's earnings conference that institutional and retailinvestors ask some most-concerned questions to the management. On this page, you may find out some valuable info that might affect the stock price in the following weeks. $Alibaba (BABA.US)$ $BABA-W (09988.HK)$
Key Takeaways:
Attitudes: long term-wise, themanagement is optimistic aboutthe multi-engine growth strategy.
Goals: the company's guidance is to grow between 11% and 16% in the H2 of FY2022, stepping down from the H1.
Q: Given that Taocaicai, Taobao Deals, the results are doing very good and we are seeing Taobao Deals the AAC already surpassing 240 million. When should we expect the monetization to ramp up?
A: Our priority for Taobao Deals and Taocaicai is still to build the infrastructure in terms of the manufacturers-to-consumers model in Taobao Deals, as well as a hyper local community marketplace infrastructure. And in terms of user engagement, we see very strong user engagement in the past quarters. The AAC for Taobao Deals reached 240 million and for Taocaicai which also show a very good, I mean, user conversion to the fresh produce and the food categories. So we are very confident that if we can provide value to the consumers, we believe that we can generate also the value to the platforms as well.
Q: You guys mentioned that the weak revenue momentum was due to both macro and competition.For competition, what are the areas that you see the most pressure and the challenge, and what are the strategies to regain competitiveness in those areas?
Q: You guys mentioned that the weak revenue momentum was due to both macro and competition.For competition, what are the areas that you see the most pressure and the challenge, and what are the strategies to regain competitiveness in those areas?
A: Today, the definition of e-commerce is evolving. There are multi-formats of e-commerce model. And as long as you have some traffic, you have a user with you and based on the public available third-party payment solution and the logistic and delivery, fast delivery, express deliveries, anybody can try something on e-commerce. But we strongly believe that for Taobao, our advantage is a consumer mindset -- and we are purely a consumption destination for all the customers, so we will continue to develop multi-features and applications in our Taobao app at the same time to segment our user group by different mobile apps for specific value propositions.
Q: Your guidance seems to suggest you'll grow between 11% and 16%, in the second half of 2022, and that's a step down from the pace of growth you had in the first half. So what are you seeing that gives you the conviction that this slow pace will be maintained through the second half of 2022 fiscal?
A: That assumption is mainly based on the GMV growth expectation and the impact on the revenue growth is mainly placed in the core commerce and China retail commerce. We see this may continue for the following quarters. And if you look forward beyond this year, our revenue growth engine now is already beyond the China consumption beyond the CMR (customer management revenue).
So CMR, if you look at this quarter, it accounts for around 36% of total revenue, where it used to be over 50% several quarters ago. So this is because all of these cloud computing and international businesses, China, local service, they all start contributing and increases contribution to our total revenue. So this is where we talk about multi-engine growth and continue to expect to see growth in these areas.
Q: On some of the kind of new growth business that you highlighted at the press release, including both the international business and also the cloud computing business. How should we look at the growth outlook in the future?
A: You see that both cloud and international business show a very robust growth. The cloud this quarter resumed their growth to 33% year-on-year. For international wholesale and retail business as a whole reached year-on-year growth rate of 34%. So I think for both business, today, both of them are in early stage of development, early stage of growth. We're still trying to build the right infrastructure to make sure we capture the long-term opportunities and to maintain a sustainable growth. As we always said, we focus on growth, but we focus on quality as well. So we focus on a sustainable growth in capturing this new opportunities. But long term-wise, we are very confident about this multi-engine growth strategy.
This article is a script from the Q&A session of Alibaba's earnings call on Nov 18. In order to facilitate reading, we have made appropriate cuts. If you want to know more details, you can click here to re-watch the full page.
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