To The Moon

$Alibaba(BABA)$

Time to buy?

Alibaba’s 4QFY22 results came in better than expectations. Revenue grew 9% year-on-year (YoY) to CNY204.1b, which was 2% above consensus. Within China Commerce, CMR was surprisingly resilient, coming in flat YoY, aided largely by advertising revenue. Non-GAAP PATMI fell 24% YoY to CNY21.5b, which was ahead of consensus by 16%. Management noted that domestic marketplace gross merchandise value (GMV) registered low-teen YoY decline in Apr, which we believe could thus impact advertising and commissions revenue. However, there has been an improvement more recently in May as there are signs that fulfillment bottlenecks are starting to ease. Encouragingly, there appears to be a strong trend this year in terms of merchant enrollment and product offerings for the 6.18 shopping festival. On costs, management remains focus on cost optimization and control. Despite the weak macro environment and subdued consumption sentiment, i am encouraged by the recent signs of improvement in express deliveries and the start of normalization in Shanghai. I expect cost rationalization to help support its earnings outlook as well. Still, i embed more conservative assumptions given the wide range of potential outcomes, which i believe has in part contributed to the lack of guidance by management.

DYODD