CMSC: Reiterate "Buy" rating on BABA-W (09988) with a target price of 123 Hong Kong dollars.

CMSC released a research report stating that BABA-W (09988) was officially included in the Stock Connect yesterday. The bank continues to be optimistic about the company's improved competitive position, revenue growth, profit growth, and attractive shareholder returns, reiterating a "buy" rating with a target price of 123 Hong Kong dollars. The bank noted that Alibaba was officially included in the Hong Kong Stock Connect yesterday after successfully completing its dual primary listings in Hong Kong and the United States, estimating that the inclusion in the Stock Connect may bring 10-15% incremental trading liquidity. The bank pointed out that Alibaba has multiple drivers to boost its prospects. Firstly, the company is shifting its focus on GMV growth and the slowdown in GMV growth on its live streaming e-commerce platform, which the bank believes improves its competitive position. Secondly, the bank also sees benefits from Alibaba's steady operations between merchants and users, as well as opportunities for merchant return flow due to recent friction among competitors. Thirdly, monetization rate improvement: the bank expects that with the improvement in advertising and commission rates, the increase in advertising and commission revenue will help narrow the gap between GMV and revenue growth rates. For example, the company recently started charging a 0.6% additional service fee on successful transaction orders for Taobao and Xianyu sellers. The bank predicts that Alibaba's customer management revenue (CMR) will recover from a low to mid-single-digit year-on-year growth in the first half of 2024 to a high single-digit year-on-year growth in the second half of this year. Lastly, losses in other sectors such as Cainiao, local life services, and international e-commerce continue to decrease, with management planning to achieve breakeven within 24 months.