Key points: 1) Alibaba-SW’s (the "Company") 3QFY2022 revenue slightly missed, but non-GAAP net profit was better than expected. 2) We have forecasted that the Company will deliver approximately 20% yoy growth in FY2022 revenue, meeting the lower end of the updated annual revenue guidance. 3) We raise our gross margin forecasts for FY2022 to FY2024 slightly. We expect that the Company may slow down its investment pace. 4) To drive business expansion and increase penetration, total operating expenses ratio is expected to be higher amid the weak macroeconomic outlook. Weak domestic consumption is very likely to remain in the short-to-medium term, thus the Company might be required to maintain high spending to spur consumption and support merchants, as well as creating positive value to society. 5) We lower the profitability forecasts of FY2022, but raise future profitability forecasts slightly.
Cut TP to HK$160.00, but maintain investment rating as "Buy". Currently, the Company’s valuation has reached an attractive level. The recent underperformance of the Company’s share price was due to weak market sentiment in the Hong Kong stock market, but the Company’s fundamentals are solid. Our TP represents 21.0x FY2022F non-GAAP PER.