UBS: Raises target price of BABA-W (09988) to HK$190, rated "Buy"

UBS Group AG released a research report stating that the target price for BABA-W (09988) has been raised from 179 Hong Kong dollars to 190 Hong Kong dollars, while the target price for Alibaba (BABA.US) stock has been raised from 184 US dollars to 195 US dollars. Both ratings are "buy". The bank predicts that Alibaba's first quarter total revenue growth will accelerate to 9%, mainly benefiting from the accelerated growth of cloud business and the gradual fading impact of the split of the first-party business. Adjusted EBITA is expected to have bottomed out at 26 billion yuan, but still a 34% decrease compared to the same period last fiscal year. In terms of business division, for the Chinese e-commerce group, it is predicted that the Gross Merchandise Volume (GMV) of the Taobao Tmall Group (TTG) will remain flat year-on-year, due to weak consumption. Due to the possible increase in merchant subsidies during the 618 promotion period, customer management revenue (CMR) is expected to decrease by 8% year-on-year. The bank expects EBITA for the Chinese e-commerce group to be around 37 billion yuan, with instant retail losses narrowing year-on-year to 10 billion yuan, compared to losses of 18 billion yuan in the previous quarter. Revenue growth for the cloud business is expected to accelerate to 45% year-on-year; EBITA profit margin is also expected to accelerate to 11%. The bank pointed out that over the past few quarters, due to investments in AI and express e-commerce, the Alibaba Group Holding Limited Sponsored ADR's consensus earnings expectations have been continuously revised downwards, leading to lagging stock performance. From a profitability adjustment perspective, the bank believes that the market's downward adjustment cycle for earnings is over, as the market has revised expectations to lower levels, while the core TTG profit margin is improving, express e-commerce losses are narrowing, and cloud business growth is accelerating with improved profit margins. In this context, the market is expected to refocus on its highly valuable AI assets and growth story. After the recent stock price correction, the current price provides an attractive investment opportunity.