Alibaba Group Not Rated Business Expansion On Track With a Solid Quarter

Results Review, 5 November 2014
Alibaba Group (BABA US)
Not Rated
Consumer Cyclical - Retail
Market Cap: USD261,463m
Target Price:
Price:
NA
USD106
Macro
Risks
Business Expansion On Track With a Solid Quarter
Growth
Value
Alibaba Group (BABA US)
Price Close
Relative to S&P 500 (RHS)
109
164
104
156
99
148
94
141
89
133
84
125
79
117
74
110
69
102
64
300
94




0
0
.2
0
0
Alibaba’s 2QFY15 (Mar) adjusted net income climbed 16% YoY to .
0
CNY6.8bn, in line with consensus. Its revenue grew 54% YoY to 0
CNY16.8bn, beating consensus by 5%. 2QFY15 online GMV surged 59% 0
YoY to CNY556bn, with 36% contributed by mobile users. The stock is
trading at a 35x FY16F P/E (Bloomberg consensus) vs its peers’ 27x,
implying a PEG of 1.2x vs. its peers’ 0.7x.

A solid quarter. Alibaba’s 2QFY15 adjusted net income increased 16%
YoY to CNY6.8bn, in line with consensus. Its revenue grew 54% YoY to
CNY16.8bn, beating consensus by 5%. Excluding consolidating
revenues from its newly-acquired businesses (mainly UCweb and
AutoNavi), its revenue growth would be 48% YoY. Its adjusted net profit
margin dropped to 41% from 46% in the previous quarter, due to
consolidation of newly-acquired businesses with lower margins, as well
as its investment in new areas and tactical marketing spending.
250

200
150
Oct-14
Oct-14
Sep-14
Oct-14
50
Sep-14
Vol m
100
Source: Bloomberg
Avg Turnover (USD/USD)
2,888m/2,888m
Cons. Upside (%)
2.8
Upside (%)
n/a
52-wk Price low/high (USD)
68.0 - 106
Free float (%)
15
Share outstanding (m)
2,465
Shareholders (%)
Softbank
32.0
Yahoo
15.4
Jack Yun Ma
7.7
Share Performance (%)
YTD
1m
Absolute
20.4
Relative
18.2
3m
6m
12m
Shariah compliant
Yujie Li +852 2103 5680
li.yu.jie@rhbgroup.com

Mobile monetisation rate surges. Its online general merchandise
volume (GMV) in the quarter surged 59% YoY to CNY556bn, with 36%
contributed by mobile users. The number of annual active buyer reached
307m by the end of the quarter, compared with 202m YoY. Blended
monetisation rate (defined as the percentage of GMV transferred into
revenue) declined to 2.30% in 2QFY15 from 2.52% in the previous
quarter, due to strong GMV growth of Taobao Marketplace. Its mobile
monetisation rate increased to 1.87% in 2QFY15 from 1.49% in the
previous quarter, as merchants tended to spend more on mobile
marketing with more users shopping via their mobile devices.
Outlook remains positive. Alibaba does not provide any guidance on
its future financials, but will continue to invest to drive long-term growth
without a near-term margin target. During the company’s earnings
conference call yesterday, management mentioned that: i) future
mergers and acquisitions (M&As) will continue to focus on three areas ie
increasing user base and user engagement, enhancing customer
experience, and category expansion, ii) Alibaba will measure its
upcoming “Double 11” promotion not just by overall GMV but also by
how much sales are contributed by mobile users and overseas users,
and iii) Alibaba will aggressively tap into overseas market and capture
opportunities in China’s rural areas, engaging farmers in online shopping
and helping them to sell goods online.
Forecasts and Valuations
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Total turnover (CNYm)
6,670
11,903
20,025
34,517
52,504
Reported net profit (CNYm)
(802)
1,183
4,228
8,404
23,076
Recurring net profit (CNYm)
(802)
1,183
4,228
8,404
23,076
257.4
98.8
174.6
0.5
1.7
3.7
10.6
1,324
379
177
61
51
142
36
55
Recurring net profit growth (%)
Recurring EPS (CNY)
0.0
(0.3)
na
Recurring P/E (x)
na
P/B (x)
na
P/CF (x)
na
1,017
137
80
EV/EBITDA (x)
na
1,185
277
112
28
26.8
40.0
91.8
na
Return on average equity (%)
0.0
0.0
Net debt to equity (%)
0.0
0.0
net cash net cash net cash
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB
See important disclosures at the end of this report
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Platform
1
Alibaba Group (BABA US)
5 November 2014
Figure 1: Quarterly results
(CNYm)
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
Revenue
Actual
Actual
Actual
Actual
Actual
Actual
Actual
Actual
Actual
Actual
China commerce
2Q15
Actual vs
Consensus
5,601
6,152
10,172
7,242
9,193
9,213
16,761
9,965
13,348
13,559
YoY change
86.3%
87.3%
89.4%
82.2%
64.1%
49.8%
64.8%
37.6%
45.2%
47.2%
QoQ change
40.9%
9.8%
65.3%
(28.8%)
26.9%
0.2%
81.9%
(40.5%)
33.9%
1.6%
974
1,049
1,094
1,043
1,117
1,176
1,264
1,294
1,469
1,617
YoY change
2.5%
10.5%
15.8%
13.2%
14.7%
12.1%
15.5%
24.1%
31.5%
37.5%
QoQ change
5.8%
7.7%
4.3%
(4.7%)
7.1%
5.3%
7.5%
2.4%
13.5%
10.1%
155
164
165
166
174
190
196
213
236
285
YoY change
20.2%
57.7%
19.6%
15.3%
12.3%
15.9%
18.8%
28.3%
35.6%
50.0%
QoQ change
7.6%
5.8%
0.6%
0.6%
4.8%
9.2%
3.2%
8.7%
10.8%
20.8%
63
92
162
223
294
371
524
559
718
1,368
YoY change
270.6%
557.1%
422.6%
384.8%
366.7%
303.3%
223.5%
150.7%
144.2%
268.7%
QoQ change
37.0%
46.0%
76.1%
37.7%
31.8%
26.2%
41.2%
6.7%
28.4%
90.5%
6,795
7,459
11,595
8,675
10,779
10,951
18,747
12,032
15,773
16,831
YoY change
65.6%
71.3%
78.8%
70.6%
58.7%
46.8%
61.7%
38.7%
46.3%
53.7%
QoQ change
33.6%
9.8%
55.5%
(25.2%)
24.3%
1.6%
71.2%
(35.8%)
31.1%
6.7%
Cost of revenue
International commerce
Cloud computing and Internet infrastructure
Others
Total
(2,158)
(2,373)
(2,911)
(2,277)
(2,727)
(3,001)
(4,171)
(3,470)
(4,585)
(5,596)
Gross profit
4,637
5,086
8,684
6,398
8,052
7,950
14,576
8,562
11,188
11,235
YoY change
68.7%
74.6%
94.8%
90.7%
73.7%
56.4%
67.9%
33.8%
38.9%
41.3%
QoQ change
38.2%
9.7%
70.8%
(26.3%)
25.9%
(1.3%)
83.3%
(41.3%)
30.7%
0.4%
Gross margin%
68.2%
68.2%
74.9%
73.8%
74.7%
72.6%
77.8%
71.2%
70.9%
66.8%
Product development expenses
(848)
(888)
(1,163)
(854)
(1,018)
(1,168)
(1,707)
(1,200)
(1,952)
(2,581)
Sales and marketing expenses
(869)
(974)
(1,249)
(521)
(713)
(657)
(1,897)
(1,278)
(1,212)
(1,749)
General and administrative expenses
(537)
(804)
(1,003)
(545)
(865)
(793)
(2,046)
(514)
(944)
(1,960)
(36)
(37)
(32)
(25)
(35)
(39)
(123)
(118)
(234)
(598)
Impairment of goodwill and intangible assets
0
0
(175)
0
0
(44)
0
0
0
Yahoo TIPLA amendment payment
0
(3,487)
0
0
0
0
0
0
0
0
2,347
(1,104)
5,062
4,453
5,421
5,249
8,803
5,452
6,846
4,347
227.6%
131.1%
n.m.
73.9%
22.4%
26.3%
(17.2%)
(12.0%)
21.7%
(3.2%)
67.7%
(38.1%)
25.6%
(36.5%)
51.3%
50.3%
47.9%
47.0%
45.3%
43.4%
25.8%
Amortization of intangible assets
Income from operations
YoY change
165.0%
n.m.
158.7%
QoQ change
72.6%
n.m.
n.m.
Operating margin%
34.5%
(14.8%)
43.7%
Interest and investment income, net
466
Interest expense
(1,081)
Other income, net
Income before income tax and share of
results of equity investees
Income tax expenses
Share of results of equity investees
Net income
1,847
(1,558)
4,094
4,266
Net income attributable to noncontrolling interests
Dividends accrued on convertible preference shares
Net income attributable to ordinary
shareholders
1,722
(1,560)
(410)
389
711
378
5,582
13,975
4,672
(1,339)
(591)
(637)
(1,445)
(7)
(7)
(90)
4,449
4,937
8,357
5,661
6
12,440
(34)
4,943
12,406
(301)
3,032
(2)
3,030
(8)
(8)
(8)
(7)
(52)
(52)
(52)
(45)
4,045
4,197
4,385
4,883
8,266
YoY change
122.2%
n.m.
169.3%
201.7%
154.7%
n.m.
104.4%
QoQ change
23.8%
n.m.
n.m.
3.8%
4.5%
11.3%
69.3%
Net margin%
25.3%
34.9%
48.4%
40.7%
44.6%
44.1%
(20.9%)
468
(521)
241
4,445
Accretion of convertible preference shares
6,828
5,543
12,346
2,978
32.1%
181.5%
(39.0%)
(32.9%) 122.7%
(75.9%)
46.1%
78.3%
1.4%
0
5,047
(4)
Net income attributable to Alibaba Group
Holding Limited
318
(374)
5.2%
17.7%
Adjusted NI
2,097
2,430
4,834
4,508
4,583
5,893
10,463
6,671
7,317
6,808
YoY change
51.2%
137.3%
110.0%
159.2%
118.6%
142.5%
116.4%
48.0%
59.7%
15.5%
QoQ change
20.6%
15.9%
98.9%
(6.7%)
1.7%
28.6%
77.5%
(36.2%)
9.7%
(7.0%)
Adj. net margin%
30.9%
32.6%
41.7%
52.0%
42.5%
53.8%
55.8%
55.4%
46.4%
40.4%
-0.4%
Source: Company, Bloomberg
See important disclosures at the end of this report
2
Alibaba Group (BABA US)
5 November 2014
Figure 2: Annual results
FYE Mar 31 (CNYm)
FY10
FY11
FY12
FY13
FY14
Revenue
China commerce
3,716
YoY change
International commerce
2,620
YoY change
Cloud computing and Internet infrastructure
144
YoY change
Others
190
YoY change
Total
6,670
YoY change
Cost of revenue
Gross profit
7,665
15,637
29,167
45,132
106.3%
104.0%
86.5%
54.7%
3,433
3,765
4,160
4,851
31.0%
9.7%
10.5%
16.6%
425
515
650
773
195.1%
21.2%
26.2%
18.9%
380
108
540
1,748
100.0%
(71.6%)
400.0%
223.7%
11,906
20,026
34,518
52,505
78.5%
68.2%
72.4%
52.1%
(1,634)
(3,497)
(6,554)
(9,719)
(13,369)
5,036
8,409
13,472
24,799
39,136
67.0%
60.2%
84.1%
57.8%
YoY change
Gross margin%
75.5%
70.6%
67.3%
71.8%
74.5%
Product development expenses
(1,135)
(2,062)
(2,897)
(3,753)
(5,093)
Sales and marketing expenses
(2,335)
(3,154)
(3,058)
(3,613)
(4,545)
General and administrative expenses
(1,000)
(1,724)
(2,211)
(2,889)
(4,218)
(131)
(144)
(155)
(130)
(315)
(135)
(175)
(44)
Amortization of intangible assets
Impairment of goodwill and intangible assets
Yahoo TIPLA amendment payment
Income from operations
(1,308)
0
0
0
(873)
1,325
5,016
10,752
24,921
n.m.
278.5%
114.3%
131.8%
(13.1%)
11.1%
25.0%
31.1%
47.5%
384
549
258
YoY change
Operating margin%
Interest and investment income, net
Interest expense
Other income, net
0
200
Income before income tax and share of results of equity investees
(289)
Income tax expenses
(181)
Share of results of equity investees
0
(4)
(68)
(3,487)
39
(1,572)
0
1,648
(2,195)
68
327
894
2,429
1,938
5,533
10,113
26,803
(842)
(1,457)
(3,196)
(25)
(6)
(327)
(33)
0
Net income
(503)
1,608
Net income attributable to noncontrolling interests
(299)
Net income attributable to Alibaba Group Holding Limited
(802)
(425)
4,665
(437)
1,183
4,228
8,649
(117)
8,532
(203)
23,403
(88)
23,315
Accretion of convertible preference shares
0
0
0
(17)
(31)
Dividends accrued on convertible preference shares
0
0
0
(111)
(208)
Net income attributable to ordinary shareholders
(802)
YoY change
Net margin%
Adjusted NI
(12.0%)
1,183
4,228
8,404
23,076
n.m.
257.4%
98.8%
174.6%
9.9%
21.1%
24.3%
44.0%
6,452
YoY change
Adj. net margin%
32.2%
13,869
27,610
115.0%
99.1%
40.2%
52.6%
Source: Company
See important disclosures at the end of this report
3
Alibaba Group (BABA US)
5 November 2014
Figure 3: Peers Comparison I
Company
Ticker
Price
Alibaba Grp-Adr
BABA US
HSI
CSI300
106.07
Mkt cap
(USDm)
261,463
3-mth
PER
PER
PER EPS FY1 EPS FY2 3-Yr EPS PEG
avg t/o Hist (x) FY1 (x) FY2 (x)
YoY%
YoY% Cagr (%)
(x)
(USDm)
N/A
Div yld
Hist (%)
Div yld
FY1 (%)
P/BV
FY1 (x)
61.1
48.5
36.0
26.1
34.8
30.7
1.2
N/A
0.0
12.8
23,846
10.3
11.0
10.2
(6.3)
8.0
3.6
3.1
3.8
3.6
1.3
2,513
10.9
10.2
8.9
7.2
15.0
12.5
0.8
2.3
2.9
1.5
97.4
44.4
27.6
86.6
54.9
9.1
0.7
1.5
0.3
8.5
Adjusted sector avg*
Tencent
700 HK
122.70
148,246
295.2
57.2
37.0
27.9
54.7
32.6
36.9
0.8
0.2
0.3
11.3
Baidu Inc-Sp Adr
BIDU US
241.96
84,833
735.0
49.4
36.9
26.8
33.8
37.4
35.9
0.7
N/A
0.0
9.8
Netease Inc-Adr
NTES US
94.07
12,293
35.0
16.6
15.1
13.3
9.9
14.0
11.9
1.1
2.3
1.6
3.1
Qihoo 360 Te-Adr
QIHU US
71.77
9,038
270.2
87.0
29.6
18.1
194.2
63.8
88.4
0.2
N/A
0.0
8.9
Ctrip.Com-Adr
CTRP US
57.66
7,462
113.7
46.0
51.2
32.0
(10.1)
60.2
28.6
1.1
N/A
0.0
5.5
Autohome Inc-Adr
ATHM US
50.19
5,277
62.3
67.6
47.7
34.8
41.6
37.2
38.8
0.9
N/A
0.4
15.6
Yy Inc-Adr
YY US
83.51
4,668
133.3
60.3
30.4
21.2
98.2
43.4
60.4
0.4
N/A
0.0
10.2
Soufun Holdi-Adr
SFUN US
9.14
3,773
65.3
12.0
13.7
11.0
(12.7)
24.4
10.3
1.1
2.2
2.5
5.5
Bitauto Hold-Adr
BITA US
81.85
3,606
137.9
82.5
47.6
30.5
73.3
56.0
53.1
0.6
N/A
N/A
20.5
Sina Corp
SINA US
40.94
2,728
74.3
60.2
61.2
32.8
(1.6)
86.4
44.3
0.7
N/A
0.0
1.5
Sohu.Com Inc
SOHU US
49.64
1,910
20.5
N/A
N/A
N/A
N/A
N/A
(271.0)
N/A
N/A
0.0
1.6
Jd.Com Inc-Adr
JD US
24.91
34,054
139.2
N/A
N/A
N/A
N/A
N/A
(176.7)
N/A
N/A
0.0
7.8
Vipshop Holdings
VIPS US
23.67
13,377
221.1
246.6
57.7
33.8
327.1
70.7
135.1
0.3
N/A
0.0
21.0
Jumei Internatio
JMEI US
25.60
3,664
29.1
94.8
45.7
26.0
107.4
75.7
76.6
0.3
N/A
0.0
5.8
E-Commerce C-Adr
DANG US
12.97
1,057
28.1
N/A
64.4
22.0
N/A
193.3
(255.1)
N/A
N/A
0.0
9.9
Hc International
2280 HK
9.00
770
4.7
27.0
18.7
12.0
44.3
55.5
49.5
0.2
N/A
N/A
3.9
Google Inc-C
GOOG US 554.11
379,033
972.0
N/A
21.3
18.1
N/A
17.7
N/A
N/A
N/A
0.0
3.7
Facebook Inc-A
FB US
75.76
211,867
2,792.5
122.2
45.0
39.6
171.3
13.8
60.7
0.7
N/A
0.0
7.2
Amazon.Com Inc
AMZN US
302.81
140,203
1,154.6
504.7
157.2
80.6
221.0
95.1
127.2
0.6
N/A
0.0
13.5
Ebay Inc
EBAY US
53.27
66,181
727.4
24.2
18.1
16.3
33.9
10.9
18.3
0.9
N/A
0.0
2.9
Source: Bloomberg
Figure 4: Peers Comparison II
Company
Alibaba Grp-Adr
Rev Hist
(USDm)
8,584
Rev FY1
(USDm)
NP Hist
(USDm)
12,371
3,812
NP FY1
Net
Net Unlev
(USDm) gearing gearing beta
Hist (%) FY1 (%)
5,432
0.0
N.A
74.5
Net
Net
ROE
ROE Sh px
Sh px
margin margin Hist (%) FY1 (%) 1-mth % 3-mth %
Hist (%) FY1 (%)
N/A
39.6
20.4
N/A
HSI
13.0
11.9
3.4
(3.3)
CSI300
14.4
14.4
2.5
6.1
3.2
(3.7)
Adjusted sector avg*
0.0
Gross
margin
Hist (%)
44.4
43.9
0.3
0.0
1.2
59.1
17.8
20.1
21.9
19.2
Tencent
9,881
12,994
2,535
4,051
0.0
0.0
1.1
54.0
25.6
31.2
34.4
34.6
5.8
(8.1)
Baidu Inc-Sp Adr
5,223
8,023
1,720
2,270
0.0
0.0
1.4
64.1
32.9
28.3
30.5
28.2
11.8
10.5
Netease Inc-Adr
1,519
1,824
734
809
0.0
0.0
0.9
73.0
48.3
44.4
23.6
22.1
12.8
12.8
Qihoo 360 Te-Adr
671
1,358
100
334
0.0
0.0
1.6
86.9
14.8
24.6
20.7
30.8
4.7
(23.8)
Ctrip.Com-Adr
890
1,194
165
179
0.0
0.0
1.4
74.3
18.5
15.0
11.3
8.5
3.7
(10.5)
Autohome Inc-Adr
198
316
74
115
0.0
0.0
N.A
79.3
37.5
36.5
N/A
28.0
18.0
20.5
Yy Inc-Adr
297
569
78
171
0.0
0.0
1.1
51.6
26.2
30.1
37.5
39.8
8.3
3.1
Soufun Holdi-Adr
637
729
299
295
6.7
0.0
1.1
83.9
46.8
40.5
77.4
51.6
(9.1)
(19.3)
Bitauto Hold-Adr
235
342
39
75
0.0
N/A
2.2
76.7
16.8
21.8
23.3
19.2
9.4
36.7
Sina Corp
665
766
45
49
0.0
0.0
1.8
59.2
6.8
6.4
3.4
1.5
1.5
(14.1)
Sohu.Com Inc
1,400
1,656
(15)
(132)
0.0
0.0
1.2
65.7
(1.1)
(7.9)
(17.4)
(11.6)
1.8
(11.9)
Jd.Com Inc-Adr
11,337
18,336
(8)
(324)
0.0
0.0
N.A
9.9
(0.1)
(1.8)
N/A
(27.5)
(4.1)
(10.4)
1,697
3,632
52
163
0.0
0.0
1.6
24.0
3.1
4.5
35.8
45.7
21.1
13.9
483
687
25
77
0.0
0.0
N.A
41.3
5.2
11.2
52.1
23.9
9.6
(14.7)
1,034
1,329
(23)
17
0.0
0.0
N.A
17.4
(2.3)
1.3
4.1
15.5
15.8
(9.6)
137
182
25
43
0.0
N/A
0.1
91.9
18.3
23.4
29.7
23.5
(33.5)
(46.7)
59,825
52,864
12,920
17,908
0.0
0.0
N.A
56.8
21.6
33.9
14.4
16.9
(3.7)
(3.3)
7,872
12,377
1,491
4,511
0.0
0.0
0.5
76.2
18.9
36.4
16.0
18.1
(2.2)
3.1
Amazon.Com Inc
74,452
89,538
274
854
0.0
0.0
1.3
27.2
0.4
1.0
(2.2)
2.6
(6.2)
(3.5)
Ebay Inc
16,047
17,932
2,856
3,724
0.0
0.0
1.0
68.6
17.8
20.8
(0.6)
12.0
(2.1)
0.4
Vipshop Holdings
Jumei Internatio
E-Commerce C-Adr
Hc International
Google Inc-C
Facebook Inc-A
Source: Bloomberg
See important disclosures at the end of this report
4
Alibaba Group (BABA US)
5 November 2014
Financial Exhibits
Profit & Loss (CNYm)
Mar-10
Mar-11
Mar-12
Mar-13
Total turnover
6,670
11,903
20,025
34,517
52,504
Cost of sales
(1,634)
(3,497)
(6,554)
(9,719)
(13,369)
Gross profit
Mar-14
5,036
8,406
13,471
24,798
39,135
Gen & admin expenses
(1,000)
(1,724)
(2,211)
(2,889)
(4,218)
Selling expenses
(2,335)
(3,154)
(3,058)
(3,613)
(4,545)
Other operating costs
(2,574)
(2,206)
(3,187)
(7,545)
(5,452)
Operating profit
(873)
1,322
5,015
10,751
24,920
Operating EBITDA
(873)
1,322
5,885
11,686
26,574
Depreciation of fixed assets
-
-
(715)
(805)
Amortisation of intangible assets
-
-
(155)
(130)
Operating EBIT
(873)
1,322
5,015
10,751
Net income from investments
(33)
-
(25)
(6)
Interest income
384
549
258
39
(1,572)
(1,339)
(315)
24,920
(203)
1,648
Interest expense
-
(4)
(68)
Exchange gains
200
68
327
894
(2,195)
2,429
1,935
5,507
10,106
26,599
(3,196)
Pre-tax profit
(322)
Taxation
(181)
(327)
(842)
(1,457)
Minority interests
(299)
(425)
(437)
(245)
Profit after tax & minorities
(802)
1,183
4,228
8,404
23,076
Reported net profit
(802)
1,183
4,228
8,404
23,076
Recurring net profit
(802)
1,183
4,228
8,404
23,076
Mar-11
Mar-12
Mar-13
Mar-14
1,322
5,015
10,751
24,920
(327)
Source: Company data, RHB
Cash flow (CNYm)
Operating profit
Mar-10
(873)
Depreciation & amortisation
-
-
870
935
Change in working capital
-
-
4,185
7,337
2,254
2,644
8,041
1,322
12,324
21,667
29,290
549
258
Other operating cash flow
Operating cash flow
(873)
Interest received
384
Interest paid
-
Tax paid
Cash flow from operations
(4)
(327)
(489)
(68)
(842)
39
(1,572)
1,654
(5,325)
1,648
(2,195)
(1,457)
(3,196)
1,540
11,672
18,677
25,547
Capex
-
-
(2,168)
(2,503)
(4,776)
Other investing cash flow
-
-
2,043
3,048
(28,221)
Cash flow from investing activities
-
-
545
(32,997)
(125)
Shares repurchased
(2)
Proceeds from issue of shares
(1,183)
(40,111)
(157)
618
16,792
1,638
Increase in debt
-
-
121
24,834
5,623
Other financing cash flow
-
-
(262)
(2,921)
2,260
Cash flow from financing activities
-
(1,183)
475
(1,406)
9,364
-
16,857
30,396
12,022
17,816
1,914
Cash at beginning of period
Total cash generated
(489)
357
Forex effects
Implied cash at end of period
(54)
(489)
357
11,968
(76)
34,597
(97)
32,213
Source: Company data, RHB
See important disclosures at the end of this report
5
Alibaba Group (BABA US)
5 November 2014
Financial Exhibits
Balance Sheet (CNYm)
Total cash and equivalents
Mar-10
-
Accounts receivable
Mar-11
Mar-12
Mar-13
Mar-14
-
21,744
32,686
43,632
-
3,312
3,687
4,921
Other current assets
-
-
2,843
6,789
19,280
Total current assets
-
-
27,899
43,162
67,833
Total investments
-
-
1,890
1,797
20,689
Tangible fixed assets
-
-
4,164
5,703
7,241
Intangible assets
-
-
11,791
11,628
13,699
Total other assets
-
-
1,466
1,496
2,087
Total non-current assets
-
-
19,311
20,624
43,716
Total assets
-
-
47,210
63,786
111,549
Short-term debt
-
1,283
5,448
10,364
Accounts payable
-
339
1,315
2,659
Other current liabilities
-
-
10,129
17,232
24,361
Total current liabilities
-
-
11,751
23,995
37,384
-
-
22,462
30,711
Total long-term debt
Other liabilities
-
-
1,046
6,283
2,636
Total non-current liabilities
-
-
1,046
28,745
33,347
Total liabilities
-
-
12,797
52,740
70,731
-
31,488
Retained earnings reserve
(24)
29,338
Other reserves
-
-
30
10,533
10,401
Shareholders' equity
-
-
31,518
10,509
39,739
-
2,895
537
1,079
Minority interests
Total equity
-
-
34,413
11,046
40,818
Total liabilities & equity
-
-
47,210
63,786
111,549
Mar-14
Source: Company data, RHB
Key Ratios (CNY)
Mar-10
Mar-11
Mar-12
Mar-13
Revenue growth (%)
0.0
78.5
68.2
72.4
52.1
Operating profit growth (%)
0.0
0.0
279.3
114.4
131.8
Net profit growth (%)
0.0
0.0
257.4
98.8
174.6
EPS growth (%)
0.0
0.0
249.0
114.0
189.9
Bv per share growth (%)
0.0
0.0
0.0
(64.1)
299.2
Operating margin (%)
(13.1)
11.1
25.0
31.1
47.5
Net profit margin (%)
(12.0)
9.9
21.1
24.3
44.0
Return on average assets (%)
0.0
0.0
17.9
15.1
26.3
Return on average equity (%)
0.0
0.0
26.8
40.0
91.8
Net debt to equity (%)
0.0
0.0
(59.5)
(43.2)
(6.3)
(0.2)
0.6
4.7
8.1
11.7
Recurrent cash flow per share
Source: Company data, RHB
See important disclosures at the end of this report
6
Alibaba Group (BABA US)
5 November 2014
SWOT Analysis
 Strong user base and customer loyalty
 Competition
from JD.com,
which is backed
by another
Internet giant
Tencent
 Sufficient cash for future expansion
 Operating the largest and most well-known online
marketplace in China
 Providing one-stop services such as payment and
logistics
 Competition
from Tencent on
service ecommerce
 China’s
domestic
consumption is
expected to
grow faster
while its offline
retail
infrastructures
are not as
developed as
that of the US
 Overseas
competitors
entering China
market
 Increasing
Internet users
and mobile
users in China
 Businesses might be too diversified to manage
 Global demand
for made-inChina products
 Lacks popular social networking platform to
compete with Tencent
P/E (x) vs EPS growth
P/BV (x) vs ROAE
3500%
140
84%
120
3000%
120
72%
100
2500%
100
60%
80
2000%
80
48%
60
1500%
60
36%
40
1000%
40
24%
20
500%
20
12%
0
0%
0
P/E (x) (lhs)
EPS growth (rhs)
Source: Company data, RHB
0%
P/B (x) (lhs)
Jan-14
96%
140
Jan-13
160
Jan-12
4000%
Jan-11
108%
160
Jan-10
180
Jan-14
4500%
Jan-13
120%
180
Jan-12
200
Jan-11
5000%
Jan-10
200
Return on average equity (rhs)
Source: Company data, RHB
Company Profile
Alibaba Group's major businesses include Taobao Marketplace (www.taobao.com) - China's largest online shopping platform;
Tmall.com (www.tmall.com) - China's largest third-party platform for brands and retailers; Juhuasuan (www.juhuasuan.com) - China's
popular online group buying marketplace; AliExpress (www.aliexpress.com) - a global online marketplace for consumers to buy directly
from China; Alibaba.com (www.alibaba.com) - China's largest global online wholesale platform for small businesses; 1688.com
(www.1688.com) - a leading online wholesale marketplace in China; and Alibaba Cloud Computing (www.aliyun.com) - a provider of
cloud computing services to businesses and entrepreneurs. Alibaba Group also provides payment and/or escrow services on its
marketplaces through its contractual arrangements with Ant Financial Services Group, a related company of Alibaba Group which
operates Alipay (www.alipay.com).
See important disclosures at the end of this report
7
Alibaba Group (BABA US)
5 November 2014
Recommendation Chart
Price Close
100.0
98.0
96.0
94.0
92.0
90.0
88.0
86.0
84.0
Sep-14
Oct-14
Oct-14
Source: RHB, Bloomberg
See important disclosures at the end of this report
8
RHB Guide to Investment Ratings
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Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
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