Sinolink: Initiate coverage of BABA-W (09988) with a "buy" rating and a target price of HK$192.48.

Sinolink released a research report stating that BABA-W (09988) has a strong traditional shelf e-commerce advantage and is expected to achieve stable market share; Cloud business has great potential for future development. The bank predicts that the adjusted net profit attributable to the mother for FY2026-2028 will be 107.9/149.4/175.8 billion yuan, corresponding to adjusted PE ratios of 24.8/17.9/15.2 times; giving a 11 times profit valuation (EBITA basis) to the e-commerce business (excluding instant retail) in FY2026, and a cloud business valuation of 7 times PS. The bank does not currently contribute valuation to other businesses, with a target market value of 3.36 trillion yuan and a target price of 192.48 Hong Kong dollars, and an initial coverage rating of "buy." Sinolink's main points are as follows: Company Overview Alibaba Group is a leading global e-commerce Internet technology group. In June of this year, the organizational structure was reorganized, officially merging Ele.me and Fliggy into the Alibaba E-Commerce Group, and in August, the business structure was adjusted to four major sectors (Chinese E-Commerce Group, International Digital Business Group, Cloud Intelligence Group, and all others), focusing on the main business of "e-commerce, cloud + AI," increasing organizational concentration and cohesion, and revitalizing competitiveness. Instant retail defends e-commerce traffic advantages Since May, Alibaba has officially entered the field of takeout. 1) In terms of user activity, according to QuestMobile, DAU has rebounded, with Taobao DAU in May to October up by +3% / +7% / +17% / +19% / +12% / + 9% year-on-year; 2) In terms of order volume, the peak order volume in July reached 120 million, and according to data from Hongcan.com, Taobao's flash sale +Ele.me market share on mainstream takeout platforms increased significantly from 29.4% in 4Q24 to 42.8% in 3Q25 (order volume basis); 3) In terms of fulfillment capability: the number of riders increased by over 240% from April to August 2025. 4) In terms of UE, the investment in FY26Q2 was the largest, and currently UE losses have halved from their peak, with expected improvements in scale and efficiency, leading to gradual improvement in UE. The bank believes that Alibaba's e-commerce business can bring in significant cash flow, providing support for investments in instant retail; instant retail business helps to increase user activity and defend e-commerce traffic advantages. "Full-stack AI" layout, and the ability to systematically enhance AI capabilities Alibaba Cloud is one of the few "full-stack AI companies" in the world's top 4 cloud manufacturers that pursues top-notch in-house capabilities in AI chips, cloud computing platform scale, basic large model capabilities, etc. Currently, Alibaba Cloud operates 29 public cloud regions and 92 availability zones worldwide, with over 3200 edge nodes globally. Alibaba's annual Capex exceeds 100 billion yuan; the Quwen series large models have iterated to Qwen3-Max, greatly improving performance and forming a closed loop with application-side Quwen APP, Quark, Taobao, DingTalk, and other Alibaba ecosystem applications; in terms of chips, Pingtouge's latest PPU chip technology parameters are also in a leading position domestically. Risk warning: 1) risks of consumer environment falling short of expectations; 2) risks of intensified competition in the e-commerce industry; 3) policy and regulatory risks; 4) risks of technical development falling short of expectations; 5) risks of overseas business expansion falling short of expectations.