Alibaba Group (9988 HK)
Recommendation: BUY
Target Price: HK$95.00
Current Price: HK$87.20
Stop-Loss Price: N/A
Recommendation Date: September 23, 2024
Broker: UOB Kay Hian
Investment Thesis:
Alibaba Group, China’s largest e-commerce operator, continues to dominate the digital space, with a growing presence in AI through its cloud computing segment, AliCloud. The key takeaway from the 2024 Apsara Conference is the launch of Qwen 2.5, an AI model that outperforms competitors and enhances AliCloud’s position in the global market. Despite an 85% reduction in prices for its flagship Qwen-Turbo models, the company anticipates double-digit revenue growth in the second half of 2024 due to surging demand for AI products.
Detailed Analysis:
Alibaba has demonstrated a robust financial performance with revenues expected to grow by 7.4% in FY25 to RMB1,011 billion, and net profit projected to increase to RMB110 billion. Stock is currently undervalued, trading at 10.5x FY25 earnings, offering an attractive entry point. Risks include increased competition in e-commerce and higher investment in new initiatives that could impact margins. However, upcoming spin-offs and the potential listing of Ant Financial offer strong catalysts for share price appreciation.
Thank you
