Yamato: Maintain "Buy" rating on BABA-W (09988), raise target price to 175 Hong Kong dollars.

Daiwa released a research report stating that it maintains a "buy" rating on Alibaba Group Holding Limited (09988.HK), with a target price for the H shares raised from HK$165 to HK$175. Taking into account the growth in cloud revenue and cross-selling opportunities, the bank has raised Alibaba's earnings per share forecast by 1% to 3% for the fiscal years 2025 to 2027. Alibaba's higher capital expenditure compared to its peers will enable it to gain market share in the cloud business in the coming years and continue to drive the revaluation of its cloud business. Daiwa mentioned that following a breakthrough by the Chinese artificial intelligence platform DeepSeek during the Spring Festival period, the surge in demand for artificial intelligence reasoning has led to a shortage of cloud supply. Due to Alibaba's proactive capital expenditure in building cloud computing capacity, the bank believes Alibaba is best positioned to become the leader in the cloud computing market and benefit from the significant growth in public cloud consumption. Hence, the bank has raised its forecast for Alibaba's cloud revenue growth in fiscal year 2026 to 20% year-on-year; capital expenditure forecast has been raised to 126 billion RMB (same below). As for fiscal year 2027, capital expenditure forecast has been raised to 139 billion RMB.