BABA-SW(09988.HK)：RISING CONCERNS ON FURTHER LOCKDOWNS-格隆汇

机构：国泰君安国际
研究员：Danny Law

China’s e-commerce GMV grew by 6.6% yoy in 1M-3M2022 and is expected to be under pressure in 1H2022 due to rising uncertainty from the resurgence of COVID-19 in China. China’s e-commerce GMV in 1-3M2022 reached RMB3,012.0 bn, up 6.6% yoy, where total retail sales of consumer goods grew by 3.3% yoy. It seems that more regions in China will ramp up efforts to deal with the new waves of COVID-19 under the "dynamic zero-COVID" policy; we believe that this will very likely weigh more pressure on consumption and production in the short term, at least in 1H2022.
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.