CMSC: Maintaining a "strong buy" rating on BABA-W (09988) Cloud and AI accelerate profit growth potential.

CMSC released a research report stating that it is optimistic about the long-term growth potential and profit improvement space of Alibaba Cloud and AI businesses. Considering increased investment in inquiries and model training, it is expected that BABA-W (09988) non-gaap net profit attributable to the parent company for FY2027-FY2029 will be 921 billion, 1285 billion, and 1685 billion respectively. Given 10 times PE for main business net profit of FY2027 fiscal year without considering flash sale losses, and 6-8 times PS for cloud business, a target price of 170-197 Hong Kong dollars per share is provided, and a "strongly recommended" rating is maintained. CMSC's main points are as follows: Alibaba released FY2026Q4 performance The group achieved operating income of 243.4 billion yuan in this quarter, an increase of 3%, and Non-gaap net profit of 0.86 billion yuan, a decrease of 100%. E-commerce revenue and profits were steady this quarter, with CMR slowing down due to a new marketing plan; food delivery immediate retail UE continued to reduce losses and is expected to achieve positive UE before the end of the new fiscal year; cloud business maintained accelerated revenue growth, and Maas business development led to profit improvement, with cloud business profit margins expected to significantly improve in the next 1-2 years. Optimistic about the accelerated growth of revenue and profit improvement space of Alibaba Cloud, maintaining a "strongly recommended" rating. E-commerce: E-commerce revenue and profits were steady in the March quarter, with CMR slowing down due to a new marketing plan FY2026Q4 customer management revenue was 73 billion yuan, an increase of 1% compared to the same period last year. This quarter, the platform launched a new marketing development plan for some merchants, treating some subsidies as CMR offset items. Considering this impact, CMR increased by 8% year-on-year in the same caliber. On the profit side, Alibaba China's e-commerce group's adjusted EBITA was 24 billion yua...