Ali, no longer a "big horse-drawn cart"
虎嗅APP
2024-05-27 08:14Posted on the official account of Beijing Tiger Sniff APP
作者｜Eastland
Header image: Visual China
May 23, 2024 /PRNewswire/ -- Alibaba (NYSE:BABA; HK: 09988) published its Annual Report for the fiscal year ended March 31, 2024.
This is the first annual report disclosed by Alibaba after the launch of the "1+6+N" organizational reform (March 2023).
During the reporting period, Alibaba's revenue was 941.1 billion, a year-on-year increase of 8.3%; operating profit was 113.35 billion, a year-on-year increase of 13%; net profit was 71.33 billion, a year-on-year increase of 8.8%.
The annual report is decent and uneventful, but in fact, there is an undercurrent.
Anniversary "Family Portrait"
1) The six major groups are seated
The "6" in "1+6+N" represents the six major groups, and the order by revenue is as follows:
The boss Taotian Group (434.9 billion), the second cloud intelligence group (106.4 billion), the third international digital business group (102.6 billion), the fourth rookie group (99 billion), the fifth local life group (59.8 billion), and the six entertainment groups (21.1 billion).
In fiscal year 2024, Taotian Group's revenue accounted for 46.2% of total revenue; Cloud intelligence, international digital business, and rookie all accounted for more than 10% of total revenue; Local life accounted for 6.4%, and entertainment accounted for 2.2%.
2) "Going to sea" became the main driving force
Revenue in fiscal 2024 increased by 72.5 billion year-on-year, with all six major groups contributing:
No. 1 international digital business group, with revenue growth of 32.1 billion yuan and a contribution rate of 44.3%;
the second place, Taotian Group, with a revenue increase of 21.7 billion yuan and a contribution rate of 29.9%;
the third Cainiao Group, with a revenue increase of 21.5 billion yuan and a contribution rate of 29.7%;
the fourth place, Local Life Group, with a revenue increase of 9.6 billion yuan and a contribution rate of 13.2%;
The revenue growth contribution rates of cloud intelligence and big entertainment were 4% and 3.7% respectively, ranking tied for fifth.
The business of the International Digital Business Group is divided into two parts: "international retail" and "international wholesale". The former, that is, cross-border e-commerce, will have a year-on-year increase of 60% in revenue to 81.65 billion in fiscal year 2024, contributing 42.4% to the revenue of the entire Alibaba Group!
In fiscal year 2024, Cainiao's revenue increased by 28%, mainly due to the cross-border e-commerce business under International Digital Commerce, where retail revenue growth in China was only 5%.
According to rough estimates, cross-border e-commerce and its derived logistics business contribute more than 60% to Alibaba's revenue growth.
3) From the big horse-drawn cart to the division of troops
Before the organizational change in 2023, Alibaba's pattern is "the first rich to lead the latter to get rich", "big horses and small cars", that is, Tmall and Taobao, which have super profitability, drive a number of businesses that need to "burn money", and jointly build an ecosystem with e-commerce as the core. It has the taste of "big pot rice" to some extent.
The so-called "1+6+N", wherein:
"6" represents the six "war zones" - domestic e-commerce, cross-border e-commerce, logistics, cloud computing, digital entertainment, and local life, all of which are "inalienable territories" and must be "divided into forces". There is a taste of "package production to the household".
"N" is a huge basket with no friends, including Sun Art Retail, Freshippo, Ali Health, Lingxi Interactive, Yintai, Intelligent Information (mainly including UC Univision and Quark business), Fliggy, DingTalk and many other businesses.
In fiscal year 2023, the revenue of the N segment will be 197.1 billion, and the EBITA loss will be 16.26 billion, with a loss rate of 8.6%; In fiscal year 2024, the revenue of the N segment will be 192.3 billion, and the EBITA loss will drop to 9.16 billion, with a loss rate of 4.8%.
The N plate is still in a state of chaos and is expected to evolve further.
China's commercial "slimming" is Taotian Group
1) Taotian Group's revenue structure
In fiscal year 2024, Taotian Group's revenue will be 434.9 billion, which is divided into two parts: "China Retail" and "China Wholesale".
"China Retail" revenue can be broken down into "customer management", "direct sales and others":
Customer management includes: P4P marketing services; information promotion and marketing services; trading commissions; Taobao customer service, etc. Customer management is charged according to clicks or transaction amounts, which belongs to the Internet advertising business.
The direct revenue mainly comes from Tmall Supermarket and Tmall Global.
In FY2024, China's retail customer management revenue was RMB304 billion, up 4.3% year-on-year, mainly driven by an increase in GMV (total transaction value); Direct sales revenue was 110.4 billion, a year-on-year increase of 6.4%, mainly due to the strong demand for consumer electronics/electrical appliances.
There are significant seasonal fluctuations in e-commerce performance – a trough in the first quarter of a calendar year and a peak in the fourth quarter.
In the past Q1 of 2024, the retail e-commerce customer management revenue was 63.6 billion, a year-on-year increase of 5%; Direct sales revenue was 24.7 billion, down 2.1% year-on-year.
Alibaba's traditional strength in the wholesale business has actually sprouted new sprouts: revenue in fiscal year 2024 will be 20.48 billion, a year-on-year increase of 14.7%. However, due to the small proportion, it has little impact on the performance of Taotian Group.
2) The structural adjustment is immediate
"Taotian Group" is a slimmed down version of "China Business". The businesses of Sun Art Retail, Hema and Ali Health, which were originally directly operated by commercial businesses in China, were divested and classified into "All Others" (i.e., "Sector N").
Before stripping
In fiscal 2022, China's commercial revenue reached 591.6 billion, up 18% year-on-year. However, EBIT decreased by $31.2 billion, and profit margin fell to 30.8% in FY2022 from 42.6% in FY2021.
The reason for the increase in revenue is obvious: direct sales revenue increased by 78.1 billion yuan in fiscal 2022, accounting for 86.6% of China's commercial revenue increase. The direct business was fully recognized, which contributed a lot to the revenue growth, but the economic performance was not good.
In fiscal year 2023, China's commercial revenue will be 582.7 billion, down 1.5% year-on-year; Among them, the direct sales income decreased by 14 billion; EBIT margin edged up to 31.7%.
After stripping
Taotian Group, which divested part of its direct business, saw a precipitous decline in revenue and a precipitous increase in profit margin: Looking back at fiscal year 2022, direct revenue decreased by 171.1 billion yuan, and EBIT margin increased from 31.7% to 45.8%.
After the reform, the revenue quality of "Taotian" has improved and its profitability has been enhanced.
The five major groups other than Taotian are roughly divided into two categories - scale priority and benefit priority:
The first category includes "international digital business", "rookie" and "cloud intelligence". It is the right time for them to expand their market share, and they should first try to increase revenue and then profit;
The second category includes local life and entertainment. Their growth rate is slowing, and the priority now is to improve their performance and strive to break even.
Scale first
International digital business, rookie, and cloud intelligence businesses all have the primary goal of expanding scale and market share.
1) International Digital Business and Cainiao
International Digital Business
Alibaba's international business segment also includes retail and wholesale parts. Retail businesses include Lazada, AliExpress, Trendyol, and Daraz. The wholesale business mainly completes transactions through Alibaba.com platforms.
In fiscal year 2023, international retail and international wholesale revenue of 50.93 billion yuan will be 19.57 billion yuan respectively.
In fiscal 2024, international retail revenue reached 81.65 billion, up 60% year-on-year. Among them, the revenue in the first fiscal quarter (that is, the second natural quarter of 2023) was 17.1 billion, a year-on-year increase of 60%; The revenue of the second financial report was 19 billion, a year-on-year increase of 73%; In the third and fourth financial reports, the revenue growth rate was 56%.
In fiscal year 2024, international wholesale revenue will be 20.94 billion, a year-on-year increase of 7%. Among them, the revenue in the fourth financial report (that is, the first natural quarter of 2024) was 5.2 billion, a year-on-year increase of 11%.
In FY2024, International Digital Commerce EBITA was negative 8.04 billion and a loss margin of 7.8% (FY2023: 7%).
Cross-border e-commerce is Alibaba's "second growth curve", and it is worth exchanging a loss of 8 percentage points for high growth.
Rookie
In fiscal year 2023, Cainiao is already "infinitely close to profitability", with an EBITA loss of 390 million and a loss rate of only 0.5%. Among them, the operating loss ratio in the second and third fiscal quarters was zero;
In fiscal year 2024, Cainiao's revenue will be 99 billion, a year-on-year increase of 27.7%, and its EBITA profit will be 1.42 billion, achieving profitability for the first time in the fiscal year.
In the fourth quarter of 2024 (Q1 2024), international digital business revenue increased by 56% year-on-year. Cainiao has not been left behind, with revenue growth of nearly 30%. The price was a quarterly EBITA loss of 1.34 billion (EBITA profits of 880 million, 910 million and 960 million in the other three financial reports, respectively).
2) Cloud intelligence
The newly formed "cloud intelligence" section only includes Alibaba Cloud, and DingTalk is classified as "N plate".
In fiscal year 2023, cloud intelligence revenue will be 103.5 billion, a year-on-year increase of 1.5%;
In fiscal year 2024, cloud intelligence revenue will be 106.37 billion, a year-on-year increase of 2.8%;
Despite the low growth rate, Intelligent Cloud has achieved consecutive fiscal years of profitability: in fiscal years 2022, 2023, and 2024, EBIT profits will be 3.74 billion, 4.1 billion, and 6.12 billion, respectively.
It is worth noting that Cloud Intelligence has not achieved consecutive quarterly profits, with loss rates of 2.8% and 1.4% in Q2 2022 and Q2 2023, respectively.
The performance of cloud intelligence can be summarized as: annual guaranteed small profits, quarterly losses on demand.
In April 2023, Alibaba Cloud released a large language model (LLM), Tongyi Qianwen, which has begun to be integrated into the Alibaba ecosystem and various digital businesses. Moreover, Intelligent Cloud Group has opened the Tongyi Qianwen service to external customers. After the significant price reduction in 2024, customers can get AI empowerment almost free of charge to improve the user experience.
Benefit first
Local life and entertainment are "bottomless pits", and the current "optimal solution" is not to spend money for growth, but to "reduce casualties", "hold the position", and "wait for the time".
1) Local life
In fiscal years 2022, 2023, and 2024, the revenue of local living will be 44.9 billion, 50.2 billion, and 59.8 billion respectively; EBITA losses were 20 billion, 13.1 billion and 9.8 billion respectively.
In FY2024, revenue growth improved to 19% (FY2023: 12%) and EBIT loss margin was 16.4% (FY2023: 26.2%). The loss ratio declined despite double-digit revenue growth in each fiscal quarter.
In Q1 (natural quarter) of 2024, the revenue will be 14.6 billion, a year-on-year increase of 18.5, and the loss will be 3.2 billion, with a loss rate of 21.9%. It is 11 percentage points lower than that in Q1 (natural quarter) of 2023.
2) Great entertainment
In fiscal year 2023, the revenue of the "Digital Media and Entertainment" segment was 31.48 billion, and the EBITA loss was 187 million, with a loss rate of 6%.
After the adjustment of "1+6+N", businesses such as Youshi, Quark, and Lingxi Interactive Entertainment were classified into the N plate, and the newly formed "Big Entertainment" section only included Youku and Alibaba Pictures.
In fiscal year 2023, the revenue of Dawen Entertainment will be 18.1 billion, less than 60% of the revenue of "digital media entertainment". However, the EBITA loss of the "big entertainment" segment increased to 2.79 billion, with a loss rate of 15.1%.
Revenue fell by about 40% and losses increased by nearly 50%, indicating that the main consideration in restructuring is not profitability, but the indispensability of the ecosystem. As a result, the money-making business was divested, and the loss-making business was left behind.
In fiscal year 2024, Alibaba's operating profit will be 113.35 billion, a year-on-year increase of 13%; net profit was 71.33 billion, a year-on-year increase of 8.8%. What's more, organizational change is already paying off.
In 2023, the opening prices of Ali's US stocks and Hong Kong services will be US$89.9 and HK$84.53, respectively. On May 24, 2024, the closing prices of Alibaba's U.S. stocks and Hong Kong stocks were US$81.26 and HK$78.15, respectively.
It shows that there is a certain lag in the capital market's understanding of Alibaba.
*The above analysis is for reference only and does not constitute any investment advice
What are your doubts about the current investment market?
View original image 592K
-
Ali, no longer a "big horse-drawn cart"
![Jiang Ping should be even more grateful to Alibaba and Jack Ma for providing her with the opportunity to showcase[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)