Key points: 1) We expect Alibaba-SW’s revenue to grow by 7.2% yoy in 4QFY2022, down 3.5 ppts from our previous expectation. The pursuit of "dynamic zero-COVID" may bring much harder and wider impacts on China’s economic recovery; this may reduce China’s productivity and lower China’s economic activities. 2) We lower gross margin estimates for 4QFY2022 to 1QFY2023, and lift total operating expenses ratio estimates for the mentioned period. 3) The Company announced to upsize share repurchase to US$25 bn from US$15 bn in late March. We expect that the Company’s share price will continue to fluctuate in the short term, the share repurchase program may not have a significant boost for the Company’s share price under current risk-off sentiment.
Cut TP to HK$121.00, and downgrade investment rating to "Accumulate". Considering escalated COVID-19 measures in China, we think the visibility of the Company’s growth outlook is weak; a rebound might highly depend on a turnaround of China’s economy or when COVID-19 can be well controlled in China. Our TP represents 15.0x FY2023F non-GAAP PER.