Tuesday, April 22nd, 2025

The target price of HK$95.00 is based on 11x FY25F PE, which is below Alibaba’s historical mean of 22x.

Alibaba Group Overview:

  • Share Price: HK$87.20
  • Target Price: HK$95.00 (Upside of 8.9%)
  • Market Cap: HK$1.677 trillion (~US$212.1 billion)
  • Major Shareholders: Ma Jack Yun (4.5%), Vanguard Group (3.7%), BlackRock (2.6%)

Key Updates from the Apsara Conference 2024:

  • AI Initiatives:
    • Qwen 2.5 Model Release: Alibaba Cloud (AliCloud) launched the latest version of its open-source AI model, Qwen 2.5, which includes a wide range of large language models (LLM), multimodal models, math, and code models.
    • Performance: Qwen 2.5 surpasses Llama 405B in performance, offering support for 128,000 context lengths, 29 languages, and can generate up to 8,000 words.
    • Usage: These models are designed for various applications from low-power devices to enterprise-level AI usage.
  • AI Infrastructure Investment:
    • AliCloud is building a strong AI infrastructure, focusing on AI-driven innovation with its Qwen models and has introduced AI-optimized Panjiu G-series servers capable of supporting high-performance computing.
    • AliCloud’s new HPN7.0 architecture connects over 100,000 GPUs, transforming data centers into supercomputers.

AliCloud’s Strategic Directions:

  • Core of AI Revolution: Eddie Wu, Alibaba Group’s CEO, emphasized the transformative potential of AI beyond mobile screens, extending into the digital and physical worlds. Generative AI could create value 10x greater than previous mobile internet innovations.
  • Focus on Foundational Models: AliCloud focuses on foundational model development, open-source initiatives, and applications aimed at industries such as healthcare, finance, law, and research.

Pricing and Monetization:

  • Qwen-Turbo Models Pricing Reduction: Alibaba reduced the prices of its three core models to boost adoption, reducing Qwen-Turbo by 85%, Qwen-Plus by 80%, and Qwen-Max by 50%.
  • Free Token Offering: New users get 50 million free tokens and 4,500 image generation credits on Alibaba’s BaiLian platform.

Financial Outlook:

  • Revenue Growth: Alibaba expects double-digit revenue growth in 2H24 due to strong demand for AI-related products. This is projected to accelerate further into the future.
  • Earnings Forecasts (FY25-FY27):
    • Net Turnover: Expected to grow from RMB 941 billion in FY24 to RMB 1,189 billion in FY27.
    • EBITDA: Projected to increase from RMB 170 billion in FY24 to RMB 218 billion in FY27.
    • Net Profit: Expected to grow from RMB 110 billion in FY25 to RMB 145 billion by FY27.
  • Valuation: The target price of HK$95.00 is based on 11x FY25F PE, which is below Alibaba’s historical mean of 22x.Thank you

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