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Company Overview: Alibaba Group Holding Limited (NYSE: BABA) is a holding company that offers merchants, brands, and other organizations a technical framework and advertising reach, enabling them to leverage the power of innovative technology to engage with their customers and function more efficiently. Its operating segments are 1) Core Commerce, 2) Cloud Computing, 3) Digital Media and Entertainment, and 4) Innovation Projects and Others. As of November 09, 2021, it has 2.72 billion American Depositary Shares (ADS) listed and outstanding, with each ADS representing eight ordinary shares.
BABA Details
Key Takeaways from Q1FY22 (ended June 30, 2021)
Revenues & Gross Profit Key Highlights; Analysis by Kalkine Group
Recent Developments
Segment Wise Results Q1FY22
Balance Sheet & Liquidity Position
Key Metrics: In Q1FY22, BABA's operating and net margins were 15.0% and 17.9%, higher than the industry median of 3.9% and 3.2%, respectively. ROE stood at 4.7%, 530 bps more than the Q4FY21 return. Debt/Equity was 0.15x as of June 30, 2021, lower than 0.16x on June 30, 2020.
Profitability and Leverage Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders (in terms of ownership of ordinary shares listed on the HKEX) together form around 7.11% of the total shareholding, while the top 4 constitute the maximum holding. The Vanguard Group, Inc. and BlackRock Institutional Trust Co., N.A. hold the maximum stake in the company at 2.06% and 1.45%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Risk Analysis
Outlook
Valuation Methodology: Price/Cash Flow Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the last nine months, BABA's share price has corrected 39.89%. The stock is currently leaning towards the lower end of its 52-week range of USD 138.43 to USD 280.61. We have valued the stock using the Price/Cash Flow multiple-based illustrative relative valuation method and arrived at a target price with an upside of mid-twenties (in percentage terms). We believe that the company can trade at a slight discount compared to its peer's average, considering its ownership concentration, political and regulatory risks, dependence on Alipay, and stiff competition. We have taken peers like eBay inc. (NASDAQ: EBAY) and Vipshop Holdings Limited (NYSE: VIPS). Considering the strong topline performance, strong profitability margins, growth in annual active users, associated risks and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 160.19, down 1.21% as of November 09, 2021.
BABA Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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