Alibaba has dropped to HKD 89/share when we are writing this. Revenue was RMB 247,756 million which is an increase of 2% year-over-year growth. Operating income was RMB 35,031 million, an increase of 396% due to a decrease in impairment of goodwill of RMB 22,427 million. Adjusted EBITA was RMB 52,048 million, an increase of 16% yearly. The Free Cash Flow was RMB81,514 million which is an increase of 15% compared to RMB 71,002 million in the same quarter of 2021.
The Negatives
Online physical goods GMV generated on Taobao and Tmall declined mid-single digit year over year, due to soft consumer demand and a surge in COVID-19 cases which disrupt the supply chain and logistics in December 2022. The demand in the fashion category dropped while the healthcare, pet care, and fresh produce demand makes up for the decline.
The cloud segment comprises Alibaba Cloud and DingTalk saw revenue which was RMB 26,693 million, which grew 3% year-over-year compared to RMB 20,179 million in 2021. There’s a decline in hybrid cloud revenue. Revenue from customers in the Internet industry declined by 4% year-over-year because the top internet customer has gradually stopped using overseas cloud services.
Positive Highlights
Taobao Deals, Alibaba’s value-for-money platform continues to enrich product supply and enhance digital user’s experience. The paid GMB of manufacturers to consumers’ products grew 35% year-over-year on Taobao and Taobao Deals.
Direct sales and revenue grew 10% year-over-year to RMB 74,421 million due to the strong revenue growth of Freshippo and Alibaba Health. Freshippo delivered double-digit same-store sales growth and expanded digital and physical footprints in cities throughout China. There is a significant loss reduction year-over-year in the quarter. Alibaba Health sees rapid year-over-year revenue growth during the quarter due to the COVID-19 resurgence.
In International Commerce, there was a 3% year-over-year growth mainly due to the contribution from Trendyol. Lazada’s losses per order improve compared to the same period last year.
Local Consumer Services are divided into “To-Home” and “To-Destination”. For the To-Home segment, Ele.me deliver positive GMV growth driven by higher average order value and improving year-over-year order growth that turned positive in the month of December. Ele.me was able to meet surging demands for groceries and medicine. For the To-Destination segment, Amap saw recovering demand and Fliggy’s outbound travel business grew rapidly.
Cainiao’s revenue after inter-segment elimination, grew 27% year-over-year to RMB 16,553 million, due to an increase in revenue from domestic consumer logistics services. Cainiao continues to expand its international logistics network by strengthening its end-to-end logistics capabilities, which encompass eHubs, line haul, sorting centers, and last-mile networks. It expands its doorstep delivery services for China commerce consumers.
Digital Media and Entertainment Youku’s average paying subscriber base increased by 2% year-over-year, it is narrowing its losses year-over-year for seven consecutive quarters. Its revenue achieved RMB 7,586 million which is a 6% year-over-year loss.
Conclusion
The share price range between HKD 80-90/share will be an attractive entry point. We see China market will continue to recover and the worst is over. Alibaba has deep pockets of cash to continue its business investment and it does not seem to be going down anytime soon. We remain confident of Alibaba and will continue to add when the opportunity presents itself.
Leave a Reply