Equity Research

股
票
研 [Table_Title] Danny Law 罗沛达
究
Company Report: BABA-SW (09988 HK)
(852) 2509 7768
公司报告：阿里巴巴-SW (09988 HK) danny.law@gtjas.com.hk
6 August 2021

[Table_Summary]
1QFY2022 Results in Line
2022财年第一季度业绩符合预期
Company Report

公  China’s e-commerce GMV grew over 20% yoy in 1H2021. China’s [Table_Rank]
Rating: Buy
司 e-commerce GMV in 1H2021 reached RMB6,113.3 bn, up 23.2% yoy, where Maintained
total retail sales of consumer goods reached RMB21.2 trn, up 23.0% yoy.
报 评级： 买入 (维持)
 Key points: 1) Alibaba-SW’s (the "Company") 1QFY2022 results in line
告
with our expectations despite slightly missing top line. Alibaba-SW’s [Table_Price]
1QFY2022 revenue reached RMB205,740 mn, up 33.8% yoy, 3.7% below 6-18m TP 目标价: HK$260.00
our expectations. Non-GAAP net profit was RMB43,441 mn, up 10.0% yoy, in HK$280.00
line with our expectations. 2) The Company maintained its investments in
Share price 股价: HK$192.500
key strategic areas, and the guidance for FY2022 has been maintained.
The management concluded that, i) the guidance for FY2022 remains
证 券 研 究 报 告

unchanged, ii) the Company will continue to invest in expanding key strategic Stock performance
Equity Research Report

证 areas and supporting merchants, and iii) the Company’s share repurchase 股价表现
券 program will be increased to US$15 bn from US$10 bn. 3) The contraction
in gross margin estimates remains unchanged. 4) We trim down
研 operating expenses forecasts for FY2022 to FY2024. 5) The Company’s
究 effective tax rate may lift, eroding margins going forward.

报  We lower TP to HK$260.00, but maintain investment rating as "Buy". The

management is still confident to achieve approximately 30% yoy revenue
告
growth this year. At the same time, the upsized share repurchase program
will aid the stability of the Company’s share price. Currently, the Company’s
valuation has reached an attractive level. Our TP represents 27.5x FY2022F
non-GAAP PER.
[Tab
 中国电商交易总额于 2021 年上半年同比增长超 20%。于 2021 年上半年，中国电商交易
le_I 总额达到人民币 61,133 亿元，同比增长 23.2%，而社会消费品零售总额达到人民币 21.2
万亿元，同比增 23.0%。
nfo1
]  要点：1)阿里巴巴-SW(“公司”)的 2022 财年第一季度业绩符合我们的预期，尽管收入稍
互 [Table_PriceChange]
Internet Sector

差于预期。阿里巴巴-SW 2022 财年第一季度收入达到人民币 205,740 百万元，同比增长 Change in Share Price 1M 3M 1Y

联 33.8%，低于我们的预期 3.7%。非 GAAP 净利润为人民币 43,441 百万元，同比增长 股价变动 1 个月 3 个月 1年

10.0%，符合我们的预期。2)公司继续对重点战略领域进行投资，并维持 2022 财年指引。 Abs. %
网 绝对变动 %
(8.1) (13.1) (25.1)
管理层结论如下，i)2022 财年的指引保持不变，ii)公司将继续投资以扩大重点战略领域和
行 Rel. % to HS Index
相对恒指变动 %
(1.4) (4.6) (30.2)
支持商家，以及 iii)公司的股票回购计划将从 100 亿美元增加至 150 亿美元。3)毛利率的
业 Avg. Share price(HK$)
198.7 206.1 240.0
收缩预期保持不变。4)我们下调了 2022 财年至 2024 财年的运营费用预测。5)公司的有效 平均股价（港元）
税率可能会上升，侵蚀未来的利润率。 Source: Bloomberg, Guotai Junan International.

 我们下调目标价至 260.00 港元，但维持投资评级为“买入”。管理层仍有信心于今年实现

约 30%的收入同比增长。同时，扩大股票回购计划将有助于公司股价的稳定。目前，公司
估值已达到有吸引力的水平。目标价相当于 27.5 倍 2022 财年非 GAAP 市盈率。

[Tab [Table_
Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE
Profit]
年结 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率
le_I
03/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%)
nfo2
2020A 509,711 149,263 7.103 67.4 24.2 41.421 4.2 0.000 0.0 21.9
BABA-SW (09988 HK)

] 2021A 717,289 150,308 6.954 (2.1) 23.3 49.723 3.3 0.000 0.0 17.8
阿
2022F 930,373 154,490 7.006 0.7 22.9 56.076 2.9 0.000 0.0 15.2
里 2023F 1,140,520 168,000 7.469 6.6 21.5 62.694 2.6 0.000 0.0 14.3
巴 2024F 1,341,820 194,910 8.496 13.8 18.9 70.197 2.3 0.000 0.0 14.4
巴 Shares in issue (m) 总股数 (m) 21,745.4 Major shareholder 大股东 Softbank 24.8%
[Table_BaseData]
-SW

Market cap. (HK$ m) 市值 (HK$ m) 4,185,989.5 Free float (%) 自由流通比率 (%) 75.2%
3 month average vol. 3 个月平均成交股数 (‘000) 25,914.0 FY22 Net gearing (%) FY22 净负债/股东资金 (%) Net Cash
52 Weeks high/low (HK$) 52 周高/低 (HK$) 309.400 / 174.500 FY22 Non GAAP PE FY22 非 GAAP 市盈率 20.3

Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 1 of 9

 [Table_PageHeader] BABA-SW (09988 HK)

China’s e-commerce GMV grew over 20% yoy in 1H2021. According to data published by the National Bureau of Statistics of
China (NBS), China’s e-commerce GMV in 1H2021 reached RMB6,113.3 bn, up 23.2% yoy, where total retail sales of consumer

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goods reached RMB21.2 trn, up 23.0% yoy; both growth rates were almost the same. Penetration rate of online purchases in
China was 23.7% in 1H2021, down 1.5 ppts yoy. By GMV breakdown in June, China’s commodity e-commerce GMV reached

6 August 2021
RMB1,088.6 bn, up 14.6% yoy, whereas China’s service e-commerce GMV was RMB200.8 bn, up 40.0% yoy; China’s service
e-commerce GMV growth continued to outpace that of China’s commodity e-commerce GMV. By GMV segment, apparel was
the fastest growing category, followed by food and household products; their growth rates were 24.1%/ 23.5%/ 16.7%,
respectively. On the back of strong seasonality of China’s e-commerce industry, China’s express delivery volume achieved over
30% yoy growth, which amounted to 9.7 bn in June, up 30.4% yoy.

Figure-1: China’s Commodity E-Commerce GMV Figure-2: China’s Service E-Commerce GMV
(RMB Bn) (RMB Bn)
1,600 35.0% 350 100.0%

1,400 30.0% 300 80.0%

1,200 250 60.0%
25.0%
1,000
20.0% 200 40.0%
800
15.0% 150 20.0%
600
10.0% 100 0.0%
400

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200 5.0% 50 -20.0%
0 0.0% 0 -40.0%
1-2M19

10M19
11M19
1-2M20

10M20
11M20
12M20
1-2M21
12M19
4M19
5M19
6M19
8M19
9M19

3M20
4M20
6M20
7M20
8M20

3M21
4M21
5M21
6M21
3M19

7M19

5M20

9M20

1-2M19
3M19
5M19
6M19
7M19
8M19
9M19

1-2M20
3M20
4M20
5M20
6M20
7M20
8M20

1-2M21
3M21
4M21
6M21
4M19

9M20

5M21
10M19
11M19

10M20
11M20
12M20
12M19
Commodity E-commerce GMV YoY
Service E-commerce GMV YoY
Source: National Bureau of Statistics of China, Guotai Junan Source: National Bureau of Statistics of China, Guotai Junan
International. International.

Alibaba-SW’s (the "Company") 1QFY2022 results in line with our expectations despite slightly missing top line.
Alibaba-SW’s 1QFY2022 revenue reached RMB205,740 mn, up 33.8% yoy, 3.7% below our expectation. Excluding the

BABA-SW 阿里巴巴-SW (09988 HK)

consolidation of Sun Art Retail Group Limited, the Company’s revenue grew by 22% yoy to RMB187.306 mn. Non-GAAP net
profit was RMB43,441 mn, up 10.0% yoy, in line with our expectations. Annual active consumers (AAC) reached 828 mn, up
11.6% yoy, while mobile monthly active users (MAU) stood at 939 mn, up 7.4% yoy. By segment, China commerce business
reached to RMB139,730 mn, up 33.3% yoy, accounting for 67.9% of total revenue; the revenue contribution was down by 0.3
ppts yoy. In addition, Cainiao logistics services contributed RMB11,601 mn, up 50.4% yoy on the back of increase in volume of
orders fulfilled from cross-border and international commerce retail business. Revenue from local consumer services increased
by 23.3% yoy to RMB9,723 mn, thanks to an increase in GMV. Cloud computing revenue grew by 30.0% yoy to RMB16,051 mn,
below our expectations. The slower revenue yoy growth of cloud computing was due to the termination of international business
services from a top cloud customer since 4QFY2021. If excluding such impact, cloud computing revenue grew by 40% yoy.
Digital media and entertainment contributed revenue of RMB8,073 mn, up 15.4% yoy. The Company maintained the revenue
guidance for FY2022; it is expected to generate revenue of RMB930 bn at least. Gross margin for 1QFY2022 reached 39.7%,
down 5.3 ppts yoy, 0.3 ppts below our expectations. Total cost and expenses for 1QFY2022 amounted to RMB174,893 mn, up
46.9% yoy, the growth rate outpaced that of total revenue. During the earnings call, the Company announced that the share
repurchase program will be increased to US$15 bn from US$10 bn. Overall, benefitted by better operating efficiency, the
Company’s bottom line still met our expectation despite consensus-missing revenue in 1QFY2022. Also, the unchanged
revenue guidance for FY2022 and the upsized share repurchase program both showed that the Company is confident on the
business outlook. Meanwhile, the Company has reiterated that they would continue to invest in some key strategic areas, such
as community group purchasing, Taobao Deal, Idle Fish, local services, among others; these investments are still expanding at
a fast pace, which will further strengthen the Company’s ecosystem. Undoubtedly, we expect that the margins will be dragged
continuously due to continuous investments and upgrades; the net margin for this quarter declined to 21.9%, down 9.1 ppts yoy,
while non-GAAP net margin was 21.1%, down 4.6 ppts yoy.
Company Report

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 [Table_PageHeader] BABA-SW (09988 HK)

Figure-3: Alibaba-SW Quarterly Total Revenue Figure-4: Alibaba-SW Quarterly Non-GAAP Net
Profit

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(RMB mn) (RMB mn)
250,000 70.0% 70,000 80.0%
60.0% 60,000 70.0%

6 August 2021
200,000 60.0%
50.0% 50,000
50.0%
150,000 40.0% 40,000
40.0%
30.0% 30,000
100,000 30.0%
20.0% 20,000 20.0%
50,000 10,000
10.0% 10.0%
- 0.0% 0 0.0%

1QFY17

3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19

3QFY19
4QFY19

2QFY20
3QFY20
4QFY20
1QFY21

3QFY21
4QFY21
2QFY17

2QFY19

1QFY20

2QFY21

1QFY22
1QFY17
2QFY17
3QFY17
4QFY17

3QFY18
4QFY18
1QFY19
2QFY19
3QFY19

2QFY20
3QFY20
4QFY20
1QFY21
2QFY21

1QFY22
1QFY18
2QFY18

4QFY19
1QFY20

3QFY21
4QFY21
Total revenue YoY Non GAAP Net Profit YoY
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

The Company maintained its investment in key strategic areas, and the guidance for FY2022 has been maintained.
During the earnings call, the management demonstrated that the Company’s key strategic areas had grown rapidly; the key
strategic areas consist of community marketplaces, Taobao Deals, local consumer services, Lazada, among others. There were
three conclusions made from the management, i) the guidance for FY2022 remains unchanged, ii) the Company would continue

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to invest in expanding key strategic areas and supporting merchants, and iii) the Company’s share repurchase program will be
increased to US$15 bn from US$10 bn. In addition, the management also commented on some headwinds in business lines,
including i) the impact of termination of services from a top cloud customer will affect this year’s performance, and ii)
international commerce and Cainiao logistics services will both be negatively impacted by VAT exemption in the European
Union, which was effective on 1 July, 2021. Due to the abovementioned changes, we have adopted a more conservative
approach for our revenue forecasts, particularly that changing policy is still a factor in the internet industry. Our revenue
forecasts for FY2022 to FY2024 have been revised down by 0.9%/ 1.0%/ 1.1% to RMB930,373 mn/ RMB1,140,520 mn/
RMB1,341,820 mn, respectively, indicating yoy growth of 29.7%/ 22.6%/ 17.6% for the forecasted period, respectively.

BABA-SW 阿里巴巴-SW (09988 HK)

Table-1: Alibaba-SW's Revenue Breakdown
Revenue FY18 FY19 FY20 FY21 FY22F FY23F FY24F
China Core Commerce mn RMB 190,482 290,546 392,850 556,800 721,933 881,803 1,032,033
Retail mn RMB 176,559 247,615 332,750 473,683 611,225 744,378 870,356
Wholesale mn RMB 7,164 9,988 12,427 14,322 15,832 16,955 17,960
Cainiao Logistics Services mn RMB 6,759 14,885 22,233 37,258 54,190 70,046 82,358
Local Consumer Services mn RMB 0 18,058 25,440 31,537 40,686 50,424 61,360
International Core Commerce mn RMB 20,841 27,725 33,917 48,851 65,821 80,711 96,150
Retail mn RMB 14,216 19,558 24,323 34,455 47,233 57,296 67,198
Wholesale mn RMB 6,625 8,167 9,594 14,396 18,587 23,415 28,952
Other E-commerce mn RMB 2,697 5,129 9,337 15,495 23,000 30,331 36,530
Cloud Computing and Internet Infrastructure mn RMB 13,390 24,702 40,016 60,120 78,413 101,466 126,270
Others (Includes: Digital Media and Ent.,
mn RMB
and Innovation Initiatives and others) 22,856 28,742 33,591 36,023 41,207 46,210 50,836
Total mn RMB 250,266 376,844 509,711 717,289 930,373 1,140,520 1,341,820

Proportion %
China Core Commerce % 76.1% 77.1% 77.1% 77.6% 77.6% 77.3% 76.9%
Retail % 70.5% 65.7% 65.3% 66.0% 65.7% 65.3% 64.9%
Wholesale % 2.9% 2.7% 2.4% 2.0% 1.7% 1.5% 1.3%
Cainiao Logistics Services % 2.7% 3.9% 4.4% 5.2% 5.8% 6.1% 6.1%
Local Consumer Services % 0.0% 4.8% 5.0% 4.4% 4.4% 4.4% 4.6%
International Core Commerce % 8.3% 7.4% 6.7% 6.8% 7.1% 7.1% 7.2%
Retail % 5.7% 5.2% 4.8% 4.8% 5.1% 5.0% 5.0%
Wholesale % 2.6% 2.2% 1.9% 2.0% 2.0% 2.1% 2.2%
Company Report

Other E-commerce % 1.1% 1.4% 1.8% 2.2% 2.5% 2.7% 2.7%

Cloud Computing and Internet Infrastructure % 5.4% 6.6% 7.9% 8.4% 8.4% 8.9% 9.4%
Others (Includes: Digital Media and Ent.,
%
and Innovation Initiatives and others) 9.1% 7.6% 6.6% 5.0% 4.4% 4.1% 3.8%
Total % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Source: the Company, Guotai Junan International.

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 [Table_PageHeader] BABA-SW (09988 HK)

Table-2: Alibaba-SW's Key Strategic Areas Update

Business Update

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Community Marketplaces* GMV growth over 200% qoq, while GFA increased 260% qoq

6 August 2021
Idle Fish Idle Fish’s MAU was over 100 mn

Taobao Deals Taobao Deals’ AAC was over 190 mn

Ele’me Number of orders increased more than 50% yoy

Lazada Number of orders grew over 90% yoy

Source: the Company, Guotai Junan International.
*Note: community marketplaces include Taobao Grocery and Freshippo Market

Figure-5: Alibaba-SW Core Commerce Revenue Figure-6: Alibaba-SW Total Revenue Estimates
Forecasts
(RMB mn) (RMB mn)

1,400,000 70.0% 1,600,000 70.0%

59.9% 56.5% 58.1%
1,200,000 60.0% 1,400,000 60.0%
51.1% 50.6%
45.0% 1,200,000 50.0%
1,000,000 42.4% 50.0% 40.7%
1,000,000 35.3%
800,000 34.8% 40.0% 32.70% 40.0%

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30.5% 800,000 29.7%
600,000 22.5% 30.0% 22.6% 30.0%
600,000 17.6%
17.3%
400,000 20.0% 400,000 20.0%

200,000 10.0% 200,000 10.0%

0 0.0% 0 0.0%

FY22F

FY23F

FY24F
FY16A

FY17A

FY18A

FY19A

FY20A

FY21A
FY22F

FY23F

FY24F
FY16A

FY17A

FY18A

FY19A

FY20A

FY21A

Revenue from core commerce YoY Total revenue YoY

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

BABA-SW 阿里巴巴-SW (09988 HK)

The contraction in gross margin estimates remains unchanged. Gross margin for 1QFY2022 reached 39.7%, down 5.3
ppts yoy, 0.3 ppts below our expectation, while cost of goods sold (COGS) increased by 46.8% yoy; the growth rate was 12.5
ppts ahead of revenue growth. As we mentioned in our last Company Report, the Company’s COGS growth has outpaced that
of revenue since 2015, therefore gross margin is unsurprisingly to trend lower due to continuous investment. Going forward, we
expect that investment will be ongoing, since we don’t think updates to the whole ecosystem can be completed in the short
period; it seems it will be a long-term process. We have raised our COGS estimations for FY2022 to FY2024, pushing down
gross margin estimates in the forecasted period. Our gross margin estimates for FY2022 to FY2024 have been cut by 0.7ppts/
1.6ppts/ 1.7ppts to 37.4%/ 35.0%/ 33.9%, respectively.

We expect that the Company’s operating efficiency will keep improving, thus we trim down operating expenses
forecasts for FY2022 to FY2024. In 1QFY2022, the Company’s total operating expenses ratio reached 24.7%, in which sales
and marketing expenses (S&M) ratio was 13.1%, product development expenses (R&D) ratio was 6.6%, and general and
administrative expenses (G&A) ratio was 4.7%. The management mentioned that they have seen meaningful and rapid growth
for key strategic areas, proving that their investment has been valid for growing such businesses. To further help key strategic
areas penetrate their markets, we expect that S&M expenses will grow much faster, thus S&M ratio will stay at relatively high
level. On the other side, G&A expenses and R&D expenses might be lower than our previous expectation, due to the mixed
factors of i) improving operating efficiency, ii) expected to improve cost utilization, and iii) increase synergy effect from more
business integration. To conclude, we have raised our S&M ratio forecasts, but we have cut that of both G&A ratio and R&D
ratio. Taking all adjustments, our total operating expenses forecasts for FY2022 to FY2024 have been cut by 7.5%/ 10.0%/
12.3% to RMB225,188 mn/ RMB261,933 mn/ RMB293,476 mn, respectively, while total operating expenses ratio forecasts are
24.2%/ 23.0%/ 21.9% for the same period, respectively.
Company Report

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 [Table_PageHeader] BABA-SW (09988 HK)

Figure-7: Alibaba-SW Revenue Growth Vs. COGS Growth

100.0% 93.3%

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90.0%
80.0%
80.0%
70.0%

6 August 2021
58.1%
60.0%
50.6% 49.2%
50.0% 36.5% 38.2%
40.7%
35.3% 27.4%
40.0%
29.7% 19.6%
30.0% 22.6%
17.6%
20.0%
10.0%
0.0%
FY18A FY19A FY20A FY21A FY22F FY23F FY24F

revenue growth COGS growth

Source: the Company, Guotai Junan International.

Figure-8: Alibaba-SW Gross Margin Estimates Figure-9: Alibaba-SW Total Operating Expenses
Ratio Forecasts
40.0% 36.8%
66.0%
70.0% 62.4% 35.0% 32.1%
57.2% 29.3% 29.9%
28.8%
60.0% 30.0% 26.6%
24.2%

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50.0% 45.1% 25.0% 23.0%
41.3% 21.9%
37.4%
40.0% 35.0% 20.0%
44.6%
30.0% 15.0%
33.9%
20.0% 10.0%

10.0% 5.0%

0.0% 0.0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22F FY23F FY24F
FY22F

FY24F
FY23F
FY16

FY17

FY18

FY19

FY20

FY21

Total Operating Expense Ratio

Sales and Marketing Expenses Ratio
General and Administrative Expenses Ratio
Product Development Expenses Ratio
gross margin

BABA-SW 阿里巴巴-SW (09988 HK)

Amortization Cost Ratio
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.

The Company’s effective tax rate may lift, eroding margins going forward. According to the Company, they are a qualified
high and new technology enterprise, enjoying 15% preferential tax rate in China. Meanwhile, some business entities of the
Company are classified as a qualified encouraged key software enterprise, which entitles them to have tax exemption to pay
10% of preferential tax rate, but requires approval from the Chinese government every year. According to the latest information
from the Company, the preferential tax rate of 10% will not be applicable this year, at least due to that their application was
rejected. This will definitely push the effective tax rate higher this year, also there is no guarantee for approval in the future. In
reference to FY2020, by enjoying preferential tax rate of both 15% and 10%, the Company’s effective tax rate was 17.7%. If
without the preferential tax rate of 10%, we assume the effective tax rate of the Company for FY2022 to FY2023 may reach
22.1%/ 22.5%/ 21.9%, respectively. Taking all adjustments we have made, our non-GAAP net profit forecasts for FY2022 to
FY2024 have been cut by 1.2%/ 4.8%/ 1.1% to RMB173,938 mn/ RMB196,039 mn/ RMB223,972 mn, respectively, representing
yoy growth of 1.1%/ 12.7%/ 14.2%, respectively. Accordingly, our non-GAAP net margin estimates for FY2022 to FY2024 are
18.7%/ 17.2%/ 16.7%, respectively.

Figure-10: Alibaba-SW Non-GAAP Net Profit Figure-11: Alibaba-SW Margin Estimates

Forecasts
(RMB mn) 80.0%
70.0%
250,000 223,972 50% 70.0% 64.9%
196,039 45% 59.4%
200,000 173,938 40% 60.0%
171,985
35% 47.5%
50.0% 46.0%
150,000 132,479 30% 42.8%
38.4%
93,407
25% 40.0% 35.9% 34.8%
42.3%
100,000 83,214 20%
Company Report

30.0% 36.6%
57,871 15% 33.3%
42,791
50,000 10% 20.0% 24.8% 26.0%
24.0%
5% 18.7% 17.2% 16.7%
- 0% 10.0%
FY22F

FY23F

FY24F
FY16

FY17

FY18

FY19

FY20

FY21

0.0%
FY22F

FY23F

FY24F
FY16

FY17

FY18

FY19

FY20

FY21

Non GAAP net profit yoy growth Non GAAP gross margin Non GAAP EBITDA margin Non GAAP net margin
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
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 [Table_PageHeader] BABA-SW (09988 HK)

We cut TP to HK$260.00, but maintain investment rating as "Buy". The Company’s 1QFY2022 results were in line with our
expectations. Furthermore, the management is still confident to achieve approximately 30% yoy revenue growth this year. At the

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same time, we think that the upsized share repurchase program will aid the stability of the Company’s share price. Currently, the
Company’s valuation has reached an attractive level; we maintain the investment rating of the Company as "Buy". Considering

6 August 2021
that the current market has turned to be more bearish, particularly as the internet industry has been facing i) changing political
environment, 2) fierce competition among China’s e-commerce players, and 3) exhausted traffic volume. All uncertainty
surrounding the internet industry has lead to the downgrade in the internet industry’s valuation; accordingly we cut our TP to
HK$260.00, representing 27.5x FY2022F non-GAAP PER. Risk factors: 1) a slowdown in China’s economic outlook, 2) sharp
depreciation in RMB, 3) unsuccessful incubation of new businesses, 4) inefficiency of new investment, 5) failure to generate
synergy effects from new business consolidation, and 6) failure to meet new requirements from the Chinese government.

Table-3: Alibaba-SW's Quarterly Results and Projections

2QFY21 3QFY21 4QFY21 1QFY22 2QFY22 3QFY22 4QFY22
Income Statement 3Q20 4Q20 1Q21 2Q21 3Q21F 4Q21F 1Q22F
Revenue mn RMB 155,059 221,084 187,395 205,740 208,199 278,672 237,763
Cost of Revenue mn RMB (89,960) (121,268) (125,454) (124,097) (129,118) (162,191) (166,782)
Gross Profit mn RMB 65,099 99,816 61,941 81,643 79,081 116,480 70,981
Sales and Marketing Expenses mn RMB (17,371) (25,343) (25,153) (27,036) (27,690) (32,047) (28,532)
General and Administrative Expenses mn RMB (11,961) (8,692) (27,734) (7,168) (9,785) (10,590) (9,511)

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Product Development Expenses mn RMB (19,245) (13,607) (13,302) (13,519) (14,158) (16,720) (14,266)
Amortization of Intangible Assets mn RMB (2,888) (3,172) (3,415) (3,073) (3,288) (3,518) (4,287)
Operating Profit mn RMB 13,634 49,002 (7,663) 30,847 24,160 53,605 14,386
Interest Expense mn RMB (1,101) (1,092) (1,160) (1,267) (1,330) (1,397) (1,709)
Interest and Investment Income/(Loss), Net mn RMB 10,510 40,036 111 14,101 14,101 14,806 882
Other Income, Net mn RMB 1,148 2,826 2,115 2,157 1,840 1,978 2,079
Provision for Income Tax mn RMB (1,911) (9,194) (7,049) (9,096) (8,917) (15,868) (3,597)
Share of Results of Equity Investees mn RMB 4,244 (3,601) 5,992 6,093 4,053 496 5,078
Minority Interest (After Tax) mn RMB 2,352 1,558 2,288 2,233 1,246 3,004 609
Accretion of mezzanine equity mn RMB (107) (108) (113) 73 (64) (53) (39)

BABA-SW 阿里巴巴-SW (09988 HK)

Net Income (Loss) to shareholders mn RMB 28,769 79,427 (5,479) 45,141 35,089 56,570 17,689
Source: the Company, Guotai Junan International.

Company Report

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 [Table_PageHeader] BABA-SW (09988 HK)

Table-4: Peers Comparison

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Market Cap Adjusted PE EV/EBITDA P/S Adjusted PEG
Company
Stock Code Currency Last price mn HKD FY21F FY22F FY23F FY21F FY22F FY23F FY21F FY22F FY23F FY21-23

E-commerce

6 August 2021
Alibaba -SW* 9988 HK HKD 192.50 4,185,996.0 20.8 17.3 14.3 16.1 12.4 9.7 3.1 2.6 2.2 0.8
Ebay Inc EBAY US USD 67.28 356,415.2 16.9 14.6 13.1 n.a. n.a. n.a. 3.6 3.4 3.4 1.1
Amazon.Com Inc AMZN US USD 3375.99 13,294,923.7 50.1 41.1 30.7 24.3 19.9 16.6 3.0 2.6 2.4 1.5
Z Holdings Corp* 4689 JT JPY 614.8 333,138.4 54.3 40.8 33.6 n.a. n.a. n.a. 2.9 2.6 2.5 1.5
Rakuten Inc 4755 JT JPY 1356 151,470.2 n.a. n.a. 80.8 n.a. n.a. n.a. 1.2 1.0 0.9 n.a.
Jd.Com-SW 9618 HK HKD 273.6 853,076.7 42.5 26.7 19.8 46.7 24.2 17.4 0.6 0.5 n.a. 0.6
Vipshop Holdings Ltd - Adr VIPS US USD 17.49 93,516.9 10.7 9.1 8.0 6.9 5.0 3.6 0.5 0.5 0.4 0.6
Pinduoduo Inc-Adr PDD US USD 88.74 864,822.2 n.a. 528.2 61.0 n.a. n.a. 49.9 4.4 3.4 2.4 n.a.
Meituan Dianping-Class B 3690 HK HKD 211.20 1,294,418.8 n.a. 741.1 56.9 n.a. 144.0 37.0 4.3 3.3 2.7 n.a.
Xiaomi Corp-Class B 1810 HK HKD 26.30 659,734.8 27.1 22.3 18.8 21.0 16.8 13.3 1.3 1.2 1.0 1.1
Trip.Com Group Ltd-Adr TCOM US USD 24.73 122,583.2 49.8 16.0 12.3 43.3 14.5 9.9 2.9 2.3 2.0 n.a.
Simple Average 34.0 145.7 31.7 26.4 33.8 19.7 2.5 2.1 2.0 1.0
Weighted Average 37.7 94.3 29.5 20.2 24.2 17.0 3.0 2.5 2.3 1.1

Internet Conglomerate
Tencent Holdings Ltd 700 HK HKD 439 4,214,379.2 24.8 20.1 16.6 18.3 15.0 12.0 5.0 4.2 3.7 0.9

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Baidu Inc - Spon Adr BIDU US USD 165.86 456,054.3 16.9 14.8 12.2 8.4 6.3 4.3 2.6 2.2 1.9 0.8
Alphabet Inc-Cl C GOOG US USD 2738.8 14,165,143.6 25.7 23.7 20.0 17.4 14.9 12.6 7.6 6.5 5.8 1.8
Microsoft Corp MSFT US USD 289.52 16,918,331.2 37.2 33.2 28.9 26.3 22.5 19.1 11.4 10.1 8.9 2.4
Facebook Inc-A FB US USD 362.97 7,957,754.5 22.5 19.6 17.2 14.4 12.0 9.7 7.2 6.1 5.2 1.4
Softbank Group Corp* 9984 JT JPY 6788 827,737.4 7.4 10.1 7.6 10.1 12.3 11.9 1.9 1.8 1.8 (11.7)
Simple Average 22.4 20.2 17.1 15.8 13.8 11.6 5.9 5.2 4.6 (0.7)
Weighted Average 29.0 25.9 22.2 20.1 17.1 14.4 8.6 7.4 6.6 1.6

BABA-SW 阿里巴巴-SW (09988 HK)

Simple Average 29.0 98.7 26.6 21.1 24.6 16.2 3.7 3.2 3.0 0.2
Weighted Average 31.9 48.6 24.6 20.1 19.5 15.3 6.7 5.8 5.1 1.5
Source: the Company, Guotai Junan International.
* Note: those companies’ fiscal year is FY22 now, as its year-end date is 31 March of each year.

Company Report

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 [Table_PageHeader] BABA-SW (09988 HK)

Financial Statements and Ratios

[Table_IncomeStatement] Income Statement [Table_BalanceSheet] Balance Sheet

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Year end 31 Mar (RMB m) 2020A 2021A 2022F 2023F 2024F Year end 31 Mar (RMB m) 2020A 2021A 2022F 2023F 2024F

6 August 2021
Total Revenue 509,711 717,289 930,373 1,140,520 1,341,820 Property and Equipment, net 103,387 147,412 184,387 203,900 202,030

Cost of revenue (282,367) (421,205) (582,188) (741,705) (886,848) Investment Securities 161,329 237,221 304,209 355,219 409,082

Gross profit 227,344 296,084 348,185 398,815 454,972 Investment in Equity Investee 189,632 200,189 219,451 253,685 293,260

Sales and Marketing Expenses (50,673) (81,519) (115,305) (134,558) (153,847) Goodwill 276,782 292,771 307,410 322,780 338,919

General and Administrative Expenses (28,197) (55,224) (37,053) (45,339) (49,886) Intangible Assets 60,947 70,833 77,916 86,487 96,866

Product Development Expenses (43,080) (57,236) (58,663) (67,232) (74,175) Prepayments, Receivables and Other

Amortization of Intangible Assets (13,388) (12,427) (14,167) (14,804) (15,568) Assets 57,985 98,432 117,155 136,096 155,060

Impairment of Goodwill, intangible Assets (576) 0 0 0 0 Total Non-current Assets 850,062 1,046,858 1,210,528 1,358,168 1,495,217

Operating Profit 91,430 89,678 122,998 136,882 161,496

Interest Expense (5,180) (4,476) (5,703) (6,833) (8,226) Cash & Restricted Cash 345,982 356,469 448,796 534,193 638,985

Int. and Investment Income/(Loss), Net 72,956 72,794 43,890 50,737 58,652 Investment Securities 4,234 9,807 14,630 13,358 16,994

Other Income, Net 7,439 7,582 8,054 8,767 9,179 Short-term Investments 28,478 152,376 193,214 223,355 258,198

Profit Before Tax 166,645 165,578 169,239 189,553 221,102 Prepayments, Receivables and Other

Income Tax (20,562) (29,278) (37,478) (42,701) (48,504) Assets 84,229 124,708 149,107 166,340 189,518

Profit After Tax 146,083 136,300 131,761 146,852 172,598 Total Current Assets 462,923 643,360 805,747 937,246 1,103,695

Share of Results of Equity Investees (5,733) 6,984 15,720 15,694 17,036 Total Assets 1,312,985 1,690,218 2,016,274 2,295,414 2,598,912

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Non-controlling Interest 9,083 7,294 7,092 5,594 5,430

Accretion of mezzanine equity (170) (270) (83) (140) (154) Accrued Expenses, Accounts Payable,

Shareholders' Profit / Loss 149,263 150,308 154,490 168,000 194,910 and Other liabilities 164,550 261,140 327,641 418,703 470,561

Non-GAAP gross profit 234,666 307,308 356,966 409,423 467,298 Current Bank Borrowings 5,154 13,437 19,854 16,804 18,034

Non-GAAP EBITA 137,136 152,225 175,580 205,958 237,209 Income Tax Payable 20,190 25,275 29,445 30,310 31,472

Non-GAAP EBITDA 157,659 196,842 207,848 244,699 281,655 Deferred Revenue-customer Advances 38,338 62,489 70,960 83,708 105,258

Non GAAP net income to shareholders 132,479 171,985 173,938 196,039 223,972 Merchant Deposits 13,640 15,017 16,884 23,758 24,837

Basic EPS 7.103 6.954 7.006 7.469 8.496 Total Current Liabilities 241,872 377,358 464,784 573,283 650,161

Diluted EPS 6.991 6.838 6.890 7.346 8.355

Non-current Bank Borrowings 120,276 135,716 200,533 169,724 182,143

BABA-SW 阿里巴巴-SW (09988 HK)

Deferred Revenue 2,025 3,158 3,586 4,230 5,319
[Table_CashFlowStatement] Cash Flow Statement Deferred Tax Liabilities 43,898 59,598 65,558 72,114 79,325

Other Liabilities 25,263 30,754 34,430 52,375 54,547

Year end 31 Mar (RMB m) 2020A 2021A 2022F 2023F 2024F Total Non-current Liabilities 191,462 229,226 304,106 298,443 321,334

Operating Activities Total Liabilities 433,334 606,584 768,890 871,726 971,495

Net income/(loss) 140,350 143,284 147,480 162,546 189,634

Depreciation and Amortization 42,427 47,909 59,650 70,715 67,502 Total mezzanine equity 9,103 8,673 10,841 13,552 16,939

Share-based Compensation Expense 31,742 50,120 38,416 54,272 60,145 Minority Interest 115,147 137,491 144,583 150,177 155,607

Share of Results of Equity Investees 5,733 (6,984) (15,720) (15,694) (17,036) Total Shareholders' Equity 755,401 937,470 1,091,960 1,259,960 1,454,870

Income Tax Payable 2,538 4,026 4,138 4,500 5,221 Total Equity 879,651 1,083,634 1,247,384 1,423,689 1,627,417

Deferred Income Taxes (3,443) 3,236 4,142 4,720 5,361 Total Liabilities, mezzanine &

Other non cash gain or loss (57,620) (56,287) (42,355) (47,395) (50,914) Shareholders’ Equity 1,312,985 1,690,218 2,016,274 2,295,414 2,598,912

Working Capital Change 18,880 46,482 37,821 93,100 35,604

Cash from Operating Activities 180,607 231,786 233,573 326,764 295,517

[Table_FinancialRatio] Financial Ratios
Investing Activities

Capital Expenditure (45,386) (43,185) (43,122) (36,174) (42,143) 2020A 2021A 2022F 2023F 2024F

Investment (79,532) (191,804) (112,168) (120,077) (130,765) Growth %

Disp of PPE, intang assets and inv 31,417 10,061 16,297 17,026 18,700 Non GAAP gross profit 31.2% 31.0% 16.2% 14.7% 14.1%

Others (14,571) (19,266) (30,014) (27,669) (33,345) Non GAAP EBITA 30.2% 11.0% 15.3% 17.3% 15.2%

Cash from Investing Activities (108,072) (244,194) (169,008) (166,894) (187,552) Non-GAAP EBITDA 29.3% 24.9% 5.6% 17.7% 15.1%

Financing activities Non GAAP net profit to shareholders 41.8% 29.8% 1.1% 12.7% 14.2%

Net Bank Borrowings (16,022) 31,349 71,234 (33,860) 13,649

Share issuance or repurchase 91,506 (598) (897) (1,346) (2,018) Margin %

Acq add eq int in non-wholly owned sub (15,402) (11,218) (12,340) (14,191) (16,319) Non GAAP gross margin 46.0% 42.8% 38.4% 35.9% 34.8%

Others 10,771 10,549 (19,096) (16,017) 20,727 Non GAAP EBITA margin 26.9% 21.2% 18.9% 18.1% 17.7%
Company Report

Cash from Financing Activities 70,853 30,082 38,901 (65,413) 16,039 Non-GAAP EBITDA margin 30.9% 27.4% 22.3% 21.5% 21.0%

Foreign Exchange Rate Effect 4,100 (7,187) (11,140) (9,060) (19,212) Non GAAP Net margin 26.0% 24.0% 18.7% 17.2% 16.7%

Net Changes in Cash 147,488 10,487 92,327 85,397 104,792

Cash at Beg of Year 198,494 345,982 356,469 448,796 534,193

Cash at End of Year 345,982 356,469 448,796 534,193 638,985

Source: the Company, Guotai Junan International.

[Table_CompanyRatingDefinition]
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 [Table_PageHeader] BABA-SW (09988 HK)

Company Rating Definition

The Benchmark: Hong Kong Hang Seng Index

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Time Horizon: 6 to 18 months
Rating Definition

6 August 2021
Buy 买入 Relative Performance>15%;
or the fundamental outlook of the company or sector is favorable.
Accumulate 收集 Relative Performance is 5% to 15%;
or the fundamental outlook of the company or sector is favorable.
Neutral 中性 Relative Performance is -5% to 5%;
or the fundamental outlook of the company or sector is neutral.
Reduce 减持 Relative Performance is -5% to -15%;
or the fundamental outlook of the company or sector is unfavorable.
Sell 卖出 Relative Performance <-15%;
or the fundamental outlook of the company or sector is unfavorable.

[Table_IndustryRatingDefinition]
Sector Rating Definition
The Benchmark: Hong Kong Hang Seng Index
Time Horizon: 6 to 18 months
Rating Definition
Outperform 跑赢大市 Relative Performance>5%;
or the fundamental outlook of the sector is favorable.

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Neutral 中性 Relative Performance is -5% to 5%;
or the fundamental outlook of the sector is neutral.
Underperform 跑输大市 Relative Performance<-5%;
Or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS
[Table_DISCLOSUREOFINTERESTS]
(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report.
(2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.

BABA-SW 阿里巴巴-SW (09988 HK)

(3) Except for GUOTAI JUNAN I (01788 HK),CH GENERAL EDU (02175 HK),SF REIT (02191 HK),JINSHANG BANK (02558 HK),HAITIAN
ANTENNA (08227 HK),XPENG-W (09868 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the
market capitalization of the issuer mentioned in this Research Report.
(4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report
within the preceding 12 months.
(5) Guotai Junan and its group companies are making, or will make a market in the securities in respect of the issuer mentioned in this
Research Report.
(6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research
Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong
Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports,
including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest
proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales
persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be
contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not
guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking
estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable
situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where
necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in
any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject
Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.
Company Report

© 2021 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved.
27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong.
Tel.: (852) 2509-9118 Fax: (852) 2509-7793
Website: www.gtja.com.hk

See the last page for disclaimer Page 9 of 9