Earning Alert:4QFY3/22 non-GAAP net income above market expectations, no full year guidance provided
- 4QFY3/22 revenue increased 9% y-o-y to Rmb204bn
- Net-GAAP net profit dropped by 24%, better than consensus due to lower investment losses
- Revised down non-GAAP net profit forecast by 5% and 2% for FY3/23F and FY3/24F due to COVID impact
- Maintain BUY with lower TP of HK$157/US$161
4QFY3/22 results highlights
– Revenue increased by 9% y-o-y to Rmb204bn, largely in line.
– Segment wise, China commerce retail revenue grew by 7% to Rmb136bn, within which customer management was flat amid macro challenges and intensified competition.
– International commerce revenue grew by 7% to Rmb14bn; cloud segment revenue grew by 12% to Rmb19bn, slower than market expectations due to the slowing demand from internet customers; local consumer services revenue increased by 29% to Rmb12bn.
– Adjusted EBITA decreased by 30% to Rmb15.8bn, due to investments in various growth initiatives.
– Non-GAAP net income declined by 24% to Rmb19.8bn, better than market expectations of a c.35% decline due to lower investment losses in Taobao Deals and Taocaicai.
Our View:
– Management did not give a full year guidance for FY3/23 because of the uncertain macro-outlook and COVID headwinds.
– We anticipate a weaker performance in Jun quarter due to the recent round of COVID outbreaks in China. The GMV of the quarter had a low single-digit decline, mainly
due to disruptions in supply chain and logistics, as well as demand softening because of COVID-19’s impact
in March.
– Looking ahead, new growth drivers such as international business and cloud demonstrated certain level of resilience. We expect overall business to pick up along with macro-economic recovery.
-Management expects the operating loss for new business Taobao Deals and Taocaicai to narrow in next few quarters due to slower investment pace and increasing focus on cost optimisation.
In the longer term, growth will be supported by deeper penetration into lower cities areas and Cloud business’s overseas expansion.
We revised down our earnings by 5% and 2% for FY3/22F and FY3/24F, as we expect lower core ecommerce growth disrupted by COVID-19
We derive our TP at HK$157/ US$161 based on SOTP methodology. (1) Core commerce: 15xP/E FY3/23F core commerce earnings (HK$122), given slower growth amid weak macro and intensifying competition; (2) Cloud: 5x price-to-sales on FY3/23F (HK$24); and (3) Digital media and entertainment: (HK$9).