East Asia Securities: Cuts BABA-W (09988) target price by 3.8% to HK$150, rating "Buy"

East Asia Securities issued a research report stating that it has lowered the target price for Alibaba Group Holding Limited Sponsored ADR (09988) (BABA.US) by 3.8% from HK$156 to HK$150, maintaining a "Buy" investment rating. East Asia Securities stated that it is optimistic about the medium- to long-term development of Alibaba Group Holding Limited Sponsored ADR. The company is gradually transforming from a leading traditional e-commerce platform into a technology enterprise driven by dual engines: "e-commerce cash flow" and "full-stack AI." With the simultaneous advancement of large models, self-developed chips, and cloud infrastructure, the company's enterprise-level AI competitiveness is expected to continue to strengthen. The proceeds from its earlier share placement will be fully invested in its full-stack AI layout. The firm believes this represents strategic financing to support future growth rather than a reflection of funding pressure. Although short-term growth in the e-commerce business remains relatively weak, the unit economics of instant retail continue to improve, and the core business is expected to gradually stabilize. Currently, Alibaba Group Holding Limited Sponsored ADR's forward 12-month forecast price-to-earnings ratio is 14.1x, below its average over the past 10 years (18.6x), and it still trades at a substantial discount to AI cloud companies listed in Europe and the United States. As national policies continue to support the development of the AI industry and AI application scenarios increase, the valuation of the group's cloud and Model-as-a-Service (MaaS) businesses is expected to have further upside, while its T-Head chip business carries the prospect of a spin-off listing, supporting a upward re-rating of the group's valuation. Accordingly, East Asia Securities assigns Alibaba Group Holding Limited Sponsored ADR a target price-to-earnings ratio of 23x for fiscal year 2027, and adds a new forecast for the group's adjusted earnings per share of RMB5.4 for fiscal year 2027.