Opinion | The stock price rose sharply after the financial report, maybe Ali himself did not expect it

Source: True Detective AlphaSeeker

In an uncertain and low-expected market environment, an unexpected earnings report could bring an unexpected boost to the stock price, especially for a giant whose stock price has fallen 70% from its highs.

On May 26, Alibaba released its financial report for the fourth quarter of fiscal year 2022 (i.e. Q1 2022) and the full year ended March 31, 2022. The financial report shows:

  • Alibaba’s total revenue in the quarter reached 204.052 billion yuan (if not specified, all units are in RMB), a year-on-year increase of 9%, exceeding analysts’ expectations of 200.664 billion yuan;

  • Adjusted EBITA was 15.811 billion yuan, down 30% year-on-year, higher than market expectations of 15.3 billion yuan.

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After the release of the financial report, Alibaba management stated in the earnings conference call that the domestic business has been significantly affected due to the resurgence of the epidemic in the mainland since March. Financial guidance for the year.

In the past, such financial performance and expectations were difficult to ignite investor enthusiasm, but considering the pressure of the general environment and the frequent occurrence of giant financial reports, Alibaba still gave the market some surprises. As of the close of trading on May 26, eastern time, Alibaba’s stock price rose nearly 15%.

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The epidemic drags down GMV, but users perform well

The Chinese commercial segment is the basic business of Alibaba. In Q4 of fiscal year 22, the growth rate of this business was only 8%, which was lower than the growth rate of 9% of total revenue.

Looking at the performance separately, some of the segmented businesses under China’s commercial segment are under pressure, but some have good growth momentum.

In terms of Taobao and Tmall, its GMV remained stable in January and February, but declined in March, mainly due to the disruption of supply chains and logistics and reduced demand due to the impact of the epidemic; Order growth has also slowed due to the epidemic. Ali executives said in the earnings conference call that GMV may drop by more than 10% in April, and as the epidemic in Shanghai eases, there will be improvements starting in May.

Maintaining growth are Taocaicai, direct sales and other businesses, and wholesale business in China. Among them, Taocaicai GMV achieved a month-on-month growth from January to March, mainly due to the increase in the average order price; direct sales and other businesses increased by 14% year-on-year, mainly due to Sun Art Retail, Tmall Supermarket and Hema business Driven by the growth of China’s wholesale business; China’s wholesale business increased by 30%, mainly from the increase in value-added service revenue.

The management also pointed out in the earnings conference call that under the influence of the epidemic, the consumption habits of users have changed significantly, the demand for fashion and consumer electronics products has decreased, while the demand for fast food and daily necessities has increased significantly, and emerging categories such as fitness and outdoor have grown rapidly. . At the same time, due to the obvious tendency of users to stock up, the unit price of Alibaba’s “near field retail” has been significantly increased.

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Source of revenue of China’s commercial segment in Q4 FY22: Alibaba’s financial report

In terms of users, throughout fiscal 2022, the performance of the China commercial segment in attracting new users and maintaining user stickiness deserves attention.

The financial report shows that in the 12 months ended March 31, 2022, the annual active consumers of China’s commercial business totaled 903 million, with a year-on-year and month-on-month net increase of 89 million and 21 million, respectively. Alibaba attributes the robustness of user data to its APP matrix to create personalized and immersive interactive experiences for different consumption scenarios and formats, so as to attract and retain user groups with different backgrounds and shopping behaviors.

The user data of various segmented businesses also confirms this. In terms of high-net-worth users, in fiscal year 2022, more than 124 million annual active consumers on Taobao and Tmall spent more than 10,000 yuan on Taobao and Tmall; among the annual active consumers who spent more than 10,000 yuan in the previous fiscal year, 98 % continued to be active in the current fiscal year. In the sinking market, Taote’s annual active consumers exceeded 300 million. In fiscal 2022, the proportion of new annual active consumers from less developed regions in the entire Chinese commercial segment continued to exceed 70% of the total number of new additions.

Alibaba’s ideas for the Chinese commercial segment mainly revolve around new businesses and consumer/merchant experience: continuous investment in new businesses such as Taocaicai and Taote, especially in the fulfillment network; since Daishan took office this year, It has also adjusted the core strategy of Taobao and Tmall, including integrating Taobao and Tmall, improving the strategic position of Taobao live broadcast and shopping, improving consumer experience and the certainty of business operations.

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Local living growth leads the way, but losses remain

In the first three months of 2022, in the context of only single-digit growth in overall revenue, local living businesses including Ele.me, AutoNavi, Fliggy and Taoxianda grew 29% year-on-year, ahead of all others business.

Among them, “Daojia business” Ele.me has increased its average order amount in the second half of fiscal year 2022 due to its focus on user retention and operational efficiency in key cities. Benefited from the holiday marketing promotion and significant growth. Benefiting from the increase in user transaction volume and loyalty of AutoNavi, the growth of AutoNavi and Fliggy businesses “to the destination” has been relatively significant.

In terms of profitability, the adjusted EBITA loss of the local life service segment narrowed from 6.633 billion yuan to 5.483 billion yuan this quarter, but the loss rate was still as high as 52%, making it the most loss-making segment except for innovative businesses. .

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Financial performance of Alibaba’s various divisions in Q4 in fiscal year 22, source: Alibaba’s financial report

In addition, due to the impact of the new crown epidemic in March, the order volume of Fliggy and Ele.me has declined, and the growth rate of AutoNavi’s order volume has also slowed down.

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International business is under pressure

In the first three months of 2022, the growth rate of Alibaba’s international commerce segment is 7%. The main factor that slows down the growth rate of this business is the international retail commerce business.

The financial report shows that the growth rate of this business was only 4% from January to March, and the year-on-year growth rate slowed down on the one hand because Trendyol’s revenue was negatively affected by the depreciation of the Turkish lira against the RMB exchange rate; in the European market, AliExpress orders were affected by Continuing impact of EU VAT changes and the impact of the Russian-Ukrainian conflict on supply chains. In the earnings call, Alibaba’s management also pointed out that the easing of the epidemic in Southeast Asia has allowed offline consumption to recover, and Lazada’s business has been hit in the region.

The international wholesale business business under the international business segment grew by 13% year-on-year in the first three months of 2022, higher than the overall growth rate of international business, mainly due to the growth of cross-border business-related value-added service revenue, as well as revenue from Alibaba.com Increase in the number of paid memberships.

However, the year-on-year growth rate of the international wholesale commercial business has slowed compared to previous quarters due to the slowdown in China’s export growth and the impact of the epidemic on the supply chain.

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Source of revenue of Q4 international business segment in fiscal year 22: Alibaba financial report

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Cloud business growth slows, first annual profit

The cloud business has not escaped the impact of the epidemic.

From January to March, the growth rate of cloud business, including Alibaba Cloud and Dingding, slowed down. For the three months ended March 31, 2022, the revenue of cloud business after offsetting the impact of cross-segment transactions was 18.971 billion yuan. The year-on-year growth was only 12%, which was lower than the 20% growth rate in the previous quarter; if the impact of losing a single major customer (ie ByteDance’s international business) was not considered, the cloud business in this quarter increased year-on-year after offsetting the impact of cross-segment transactions 15%.

The customers of Alibaba’s cloud business come from all walks of life, and whether its growth is strong or not is mainly related to the needs of the customers’ industries. For example, in January-March 2022, the growth of cloud business performance was mainly driven by growth in the telecommunications, financial services and retail industries, while weaker demand from customers in the Internet industry, especially revenue from customers in Internet vertical industries such as online education and entertainment This decline was offset by a decline.

Due to economies of scale, the cloud business achieved adjusted EBITA profit from January to March; at the same time, in fiscal year 2022, the cloud business also achieved its first annual profit in 13 years, with an adjusted EBITA loss of 2.251 billion yuan in the last fiscal year, and in 2022 In the fiscal year, it made a profit of 1.146 billion yuan.

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Cainiao flutters its wings, and revenue from large entertainment and innovative businesses declines

The growth rate of Cainiao Network in the first three months of 2022 is 16%, second only to local life. The rapid growth of Cainiao mainly comes from logistics fulfillment solutions and value-added services for Chinese retail businesses such as Tmall, Taobao and Taote; in addition, the growth of external revenue is also a driving factor for Cainiao’s growth, Jan-Mar 2022 , revenue from external merchants increased by more than 30% year-on-year.

The large entertainment sector and “innovation and others” are the only two sectors in which Alibaba’s performance has declined.

According to the financial report, the revenue of “Digital Media and Entertainment” in the first three months of 2022 was 8.005 billion yuan, a year-on-year decrease of 1%. At the same time, due to the control of content and production investment, the adjusted EBITA loss of this business narrowed to 1.966 billion yuan from 2.698 billion yuan in the same period of the previous year.

Revenue from the “Innovation and Others” business, including Tmall Genie and Dharma Academy, was 384 million yuan in the quarter, down 35% year-on-year, and the adjusted EBITA loss also widened to 2.452 billion yuan from 1.648 billion yuan in the same period last year. , equivalent to nearly 7 times the income.

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Source of revenue of Q4 entertainment and innovation business in fiscal year 22: Alibaba financial report

At the beginning of 2022, a series of uncertain factors at home and abroad will follow, impacting the performance of domestic Internet giants – the growth rate is generally slowing down, and profits are under pressure.

Alibaba is one of them. In fact, Alibaba’s performance has been under pressure due to multiple internal and external factors since last year. In order to cope with successive challenges, Alibaba has been adjusting its internal structure and development strategy. In December last year, Alibaba announced that it would re-divide its business logic according to domestic and foreign logic, with Dai Shan and Jiang Fan taking over Alibaba’s domestic and foreign business respectively.

During the conference call, Alibaba executives emphasized that the company will continue to reduce costs and increase efficiency in the coming year, including shutting down and re-transferring businesses with insignificant long-term value; setting cost reduction and efficiency goals according to the different nature of the business, such as The direct sales business should increase the gross profit, the logistics business should increase the efficiency, and control the marketing expenses.

Facing an uncertain future, Ali can only seek certainty from itself.

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