Shen Wan Hongyuan: Maintaining Alibaba-W (09988) “Buy” Rating Target Price of HK$197

The Zhitong Finance App learned that Shen Wan Hongyuan released a research report stating that it will maintain the Alibaba-W (09988) profit forecast and maintain the purchase rating. Alibaba Group's overall FY2026-FY2028 revenue is estimated to be 10386/11434/1250.6 billion yuan, respectively, and adjusted net profit to mother of 1019/1455/ 183.6 billion yuan, respectively. Under the SOTP valuation method, the Group's overall target valuation is RMB 3412.4 billion, corresponding to a target price of 203 USD/ADS, corresponding to 34% upward space, corresponding to a target price of HK$197 per share for Hong Kong stocks, and 34% upward space.

Shen Wan Hongyuan's main views are as follows:

AI cloud growth will continue to be realized

Referring to the past three years overseas, the trend of increasing Capex - cloud revenue acceleration continues, and the fundamentals of domestic cloud companies will continue to rise next year. Domestic AI cloud upstream drive: the pressure on upstream chips has partially eased, and the downstream AI penetration rate is still improving. Alibaba is a scarce domestic cloud factory with a “chip-server-cloud computing operating system-big model” full-stack self-developed technology system; the revenue volume, revenue growth rate, and profit margin are all in the domestic tier. The global growth rate is catching up with Google Cloud, but there is still a gap in profit margins compared to overseas, and the scale effect of self-developed chips+own scenarios is expected to increase profit margins in the long term.

How do you watch Byte Volcano engine competition?

Volcano Engine focuses on the MaaS layer (model capability+low cost), but Alibaba Cloud's advantages in full-stack solutions and ecological integrity are difficult to replicate in the short term. Currently, the MaaS market is still small. Alibaba Cloud's leading position in the broader AIIaaS and overall cloud market is stable. Its growth logic is to take on the overall intelligent transformation needs of enterprises, not only to provide a single model for application.

AI Increment 1: Localization of AI Chips, Pingtou Ge Starts Overseas Sales

In the context of increasing demand for localized computing power, its product performance has matched mainstream international standards and successfully won the bid for large-scale intelligent computing center projects. It is not only the key for Alibaba Cloud to provide differentiated computing power services and increase profit margins, but it is also the core gripper for outputting full-stack AI solutions and binding customers. The arrival of a wave of domestic chips on the market will help Internet cloud manufacturers discover the value of self-developed chips.

AI Increment 2: Seize the C-side entrance and is expected to start monetizing

Overseas Chatbot monetization is mainly subscription fees, APIs, and programming, but OpenAI is also experimenting with shopping guides for monetization. Domestic internet companies have a clear advantage in traffic management. Ali laid out the AIC terminal portal to seize dominance in the evolution of “graphical interface (GUI)” to “natural language interface (LUI)”. Qianwen was upgraded to a superassistant connecting ecosystems such as Taobao, Gaode, and Alipay, and launched “Quark AI Glasses” that deeply integrate ecosystems, making “dialogue” the starting point for connecting all services. If the “C-side AI entrance-developer-user” ecological cycle is established, Ali will smoothly transform existing business advantages such as e-commerce and local life into user stickiness and data assets in the AI era.

Risk warning: Macro influence on the demand of enterprises to go to the cloud. The progress of the domestic AI industry falls short of expectations, and competition among domestic cloud manufacturers is intensifying.