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Alibaba March Quarter 2023 Investment Note
Alibaba demolished quarterly earnings estimates, 3 IPOs in pipeline
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Key Takeaways:
Attitude: Looking at the macro environment in China and globally, the company saw both challenges and opportunities amid uncertainties for an economic recovery. The international macro environment is highly uncertain. Besides, competition among the multiple consumption platforms is still fierce, and each player is trying to capture the incremental demand with more value-for-money products and services. Meanwhile, the company saw market opportunities in China's consumption recovery post the pandemic and the rapid development of artificial intelligence. "We will continue to execute our core strategies in consumption, cloud computing, and globalization in response to these opportunities." Said CEO Daniel Zhang.
Service & Product: For China Commerce, online physical goods GMV, declined mid-single-digit year-over-year. China's consumption gradually recovered throughout the quarter that ended on March 31. In March, online physical goods GMV growth on Taobao and Tmall, turned positive, driven by strong growth in fashion & accessories and healthcare categories. For International Commerce, the combined order volume grew 15% year-over-year. Trendyol's order growth rate year-over-year in this quarter remained resilient, driven by the normalization of Turkish business from March onwards as well as the strong order growth in new businesses. For Cloud business, the company unveiled its large language model (LLM), Tongyi Qianwen, in April. The company plans to integrate the LLM into all business applications across Alibaba's ecosystem in the near future to enhance user experience. Alibaba Cloud will offer its clients access to Tongyi Qianwen on the cloud, enabling them to develop customized LLMs for their business scenarios. Since the announcement, Alibaba has received over 200,000 testing requests from enterprise users
Guidance: The company will focus on the following areas in a competitive China market: A) acquisition and retention of high-quality users; B) maintaining its platforms differentiated consumer mindset; C) most importantly, the creation of new demand through supply-side innovations. In international commerce, Alibaba will focus on building core capabilities to support the sustainable development of the international commerce business, also leveraging the unique advantage of China's supply chain to serve global consumers.
IPO: The company's board has approved a full spin-off of the Cloud Intelligence Group via a stock dividend distribution to shareholders, with the intention of becoming an independent publicly listed company. Besides, the board has also approved the process to start external financing for Alibaba International Digital Commerce Business Group, the exploration of an IPO for Cainiao Smart Logistics Group, and the execution of an IPO for Freshippo in the next 6 to 18 months.
Earnings Q&A
Q: Could you tell us further about how that will work for the cloud business pursuing an IPO? Will the buybacks be more favorable than dividends from the tax perspective?
Toby Xu: Regarding the spin-off of the cloud business, looking at ways to accomplish that transaction in a way that will maximize the benefit to the shareholders and ensure an outstanding shareholder return. Your second question concerned the relative merits of buybacks versus dividends. So, in the cloud business case, we've opted to go with the dividend approach. But if you ask more generally what's better, buybacks versus dividend distributions, I think there'll be different opinions and different voices in the market. What I can tell you is we have this capital management committee that will, I'm sure, give full consideration to all of these different factors and make a solid decision at the end of the day as to what makes the most sense that is in the best interest of shareholders and stakeholders to ensure an excellent return to our shareholders.
Q: What is the growth rate of the e-commerce segment, Taobao and Tmall? What is the outlook for this year's business?
Trudy Dai: In the China Commerce business, the results in March and April were quite good, especially in terms of user growth and order volume growth. There are several reasons for this. I think the first one is the slow recovery of the economy after the first quarter. The second one is that our previous actions to reduce costs and increase efficiency were effective in the long run, and we have seen the results in the past few months. Another is that under our three strategies of user-first, eco-prosperity, and technology-driven this year, we have only just begun to invest in users, businesses, and technology. As I said before, I am using a three-year cycle to plan and operate. I believe the growth in users and merchants will definitely lead to growth on our scale.
Q: Regarding Alibaba International Digital Commerce (AIDC), which is currently experiencing losses and will require additional investment, could you share your plans for the business?
Jiang Fan: Our international business comprises a lot of different business models across a lot of different regions. So, some of those components of the business are profitable and doing well profit-wise, others are still in the early investment phase. But in general terms, we see great potential in international markets for the business, both on the retail side and on the B2B or wholesale side. So, in markets where we see strong potential, we will be investing in developing the business, while at the same time in respect of our existing or the more established businesses, we will be looking at ways to further enhance operating efficiencies. So, we're looking at each market differently and taking a dynamic approach.
Q: What will be the primary goal going forward after the reorganization? Will it focus on maximizing Gross Merchandise Volume (GMV), or will there be a more balanced strategy?
Trudy Dai: In our investment decisions, Alibaba will always considers the end goal and plans accordingly. Given the global uncertainty and rapid technological advancements, we factor these into our long-term plans. Over the next three to five years, our focus on Taobao will prioritize user-centricity, building a thriving ecosystem, driving technology-driven innovation, and transitioning from transactions to consumption and ultimately to enhancing users' lives. We acknowledge the competitive environment but aim to meet diverse user demands, optimize user experience, and increase user engagement. Additionally, we view take rate as an indicator of platform health and merchants' confidence and recognition on the platform, encompassing both goods sellers and content creators.
Last but not least,
Last but not least,
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For more information:
This article is a script from the BABA Q4 FY23 earnings conference call. In order to facilitate reading, we have made appropriate cuts and revisions. This presentation is for information and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Before investing, please consult a licensed professional. See this link for more information.
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Small bull : IPO? too long many months later. Nobody will IPO in downturn
quekky : every company now comes out with their AI ideas, Alibaba is no exceptions. lets wait for them to split to 6 units and see if the stocks can go to the moon
Cloud D Investor : ignore the geo political tension, ignore the recency bias, ignore the herd's mentality, ignore the noise. Let Alibaba's management do what they are good at, which is running the business.
Moogoorooloo : A company with growth potential is worth taking a look at. For Alibaba, the growth potential is there. The question to ask is: Do you have the patience to see it grow?
MultiBaggers : BaBa has always been one of the few Chinese companies that I have been averaging down on! Continue to average down together with JD.com
102405503 No limit : funds are just rotating across different sectors... focusing on future growth and those with a strong story line behind it , is a matter of time this stock move to its true intrinsic value
SG_Ho : Still think BABA have great future must hold
ReverseOrContinue : Everybody is talking about AI now. Where's the guy who talked about Alibaba Intelligence? Oh he's not here anymore. I'm out.
LH_XY_C_L : Alibaba has always been one of the few Chinese companies that is undervalue & potential upside growth! nevertheless geopolitical & China influence shall always bear in mind while investing on it
No_Horse_Run_4896 : It might take some time before we are able to see any real positive trend. Take a best seat, eat some popcorn and waits for the gem to be unveiled![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
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