Documente Academic
Documente Profesional
Documente Cultură
Neil Doshi
(415) 762-4880 ndoshi@crtllc.com
Managing Director
Robert Coolbrith
(415) 762-4890 rcoolbrith@crtllc.com
Vice President
Initiation
Please find important disclosures including common stock risks beginning on page 50.
September
September
17,17,
2014
2014
Key Data
Rating
Price Target
Price (09/16/2014 Close)
52 Week High-Low
Shares Out (mm)
90-day Average Daily Vol
Buy
$95.00
NA
NA - NA
2,491.0
NA
CRT Estimates
FY December
Total Revenue
EPS Non-GAAP
Total Revenue
2014
2015
2016
EPS Non-GAAP
2015
2016
2014A
$8,401
$1.84
2015E
$12,020
$2.43
2016E 2017E
$16,189 $20,569
$3.27
$4.16
Q1
Q2
Q3
Q4
$1,724A $1,752A $2,999A $1,925A
$2,523A $2,508E $4,069E $2,920E
$3,404E $3,439E $5,365E $3,980E
$0.49A
$0.68E
$0.51E
$0.70E
$0.82E
$1.07E
$0.60E
$0.82E
CRT Estimate
Model Summary
Rating Rationale
Financials
F2013A
F2014A
F2015E
F2016E
F2017E
'F14-'F17 CAGR
Revenue ($M)
YoY Change
EBITDA ($M)
YoY Change
Margin
GAAP EPS
YoY Change
Non-GAAP EPS
YoY Change
$5,523
72%
$2,657
128%
48%
$0.57
114%
$0.93
137%
$8,401
52%
$4,714
77%
56%
$1.60
180%
$1.84
98%
$12,020
43%
$6,427
36%
53%
$2.46
54%
$2.43
31%
$16,189
35%
$9,004
40%
56%
$2.87
17%
$3.27
35%
$20,569
27%
$11,943
33%
58%
$3.72
30%
$4.16
27%
35%
36%
32%
31%
Valuation Methodology
Our $95 Target Price is based the average of our 2016 EV/EBITDA and C2016
Adjusted P/E Valuation methodologies.
Using an EV/EBITDA analysis, if we apply a 26x multiple to our 2016 Adjusted
EBITDA estimate of $8.3B, adjusting for $35.9B in calendar year-end 2015
cash and $9.9B in calendar year-end 2015 debt, we derive a valuation of $91
per share. Our target multiple is derived from historical and future growth
assumptions, comparable public company multiples, and various intangibles
like management, product pipeline, defensible business model, etc.
Using a P/E analysis, if we apply a 32x multiple to our 2016 Adjusted P/E
estimate of $3.04, this would imply a $97 target price.
The average of these two methodologies yields a target price of $94.30, which
we round to $95 for convenience
Valuation Summary
Valuation
P/Sales
EV/EBITDA
GAAP P/E
Non-GAAP P/E
F2013A
30.7x
59.4x
119.0x
73.0x
F2014A
20.2x
33.5x
42.5x
36.9x
F2015E
14.1x
24.5x
27.6x
28.0x
F2016E
10.5x
17.5x
23.7x
20.8x
F2017E
7.7x
13.2x
18.3x
16.4x
Page 2
Company Overview
Alibaba Group Holding Limited is a group of e-commerce businesses; an online and
mobile commerce company that offers a platform for retail and wholesale trade, among
other services. A group of 18 members, headed by Jack Ma, founded the Company in
1999 by launching Alibaba.com and Alibaba.com.cn (now 1688.com), allowing small
Chinese manufacturers and exporters to reach local and global wholesalers. While the
Company offers a platform to facilitate internet based trade, it does not hold inventory,
place direct sales, or compete with sellers. For the 12 months ended June 30, 2014,
Alibabas three primary consumer China retail sites generated $296B in GMVlarger
than the GMV of AMZN and EBAY combined. Alibaba had 279M active buyers and 8.5M
active sellers on its platform in the twelve months ending June 30, 2014. Today, Alibaba
Group is the largest online and mobile commerce company in the world in terms of
gross merchandise volume (GMV). It also provides other services through its subsidiaries
and affiliates such as Cloud Computing, Marketing, Logistics, and transaction
settlement. The exhibit below shows the Companys history as it has evolved since its
founding in 1999.
Exhibit 1. BABA Corporate Timeline
Year
Company Milestone
1999
2003
2004
2007
2008
Tmall launched
2009
2010
Juhuasuan launched
Ali Express launched
Mobile Taobao App launched
2011
Total revenue increased by 52% from $5.5B in FY13 to $8.4B in FY14, and net income
increased by ~174% from ~$1.3B in FY13 to $3.7B in FY14. The Companys GMV
generated from China retail marketplaces (Taobao, Tmall, and Juhuasuan) increased by
~56% in FY14 to $270B. The Companys major sources of revenue include: 1) China
Commerce (including Taobao, Tmall, Juhuasuan and 1688.com) which accounted for
86% of total Company revenue in FY14, 2) International Commerce (including
Alibaba.com and AliExpress) which accounted for 9% of FY14 revenue, 3) Cloud
computing and Internet infrastructure services which accounted for ~2% of total FY14
revenue, and Other, which primarily consists of interest income from the Companys
micro-loan portfolio, accounted for 3% of total FY14 revenue.
Page 3
Historically, buyers and sellers used the Alibaba platform primarily on personal
computers. However, the Company has seen significant growth in the utilization of
mobile devices among consumers who use the Alibaba platform. Mobile GMV
accounted for ~33% of GMV as of June 2014, up from 12% in June 2013. The number of
mobile MAUs increased from 136M in December 2013 to 188M in June 2014.
The Companys key retail businesses include:
1. Taobao Marketplace an online shopping destination that connects Chinese
buyers to individual and small business merchants. In 2013, it was ranked #1 in
C2C marketplace in terms of GMV in China.
2. Tmall.com a retail platform for Chinese consumers to be able to purchase
branded products online from retailers. It was the largest brands and retail
platform in China in terms of GMV in 2013.
3. Juhuasuan a group buying platform where merchants from Taobao or Tmall
offer quality products at discounted prices, mainly through flash sales, for a
limited period of time.
4. AliExpress a platform that allows consumers around the world to be able to
buy directly from Chinese manufacturers and wholesalers.
The Companys wholesale trading platform includes:
1. Alibaba.com launched in 1999, as the Companys first e-commerce platform.
It is a global, wholesale marketplace that allows Chinese and International
manufacturers to sell products to wholesale buyers around the globe; and
2. 1688.com also a wholesale marketplace, it connects Chinese wholesale buyers
and sellers. Retail merchants on the Alibaba platform may also source their
products from 1688.com to do business with consumers. As of June 30 th, 2014,
the wholesale platforms had 857,000 paying members.
The Company has progressed beyond its core e-commerce business to also provide
other revenue generating services through its subsidiaries and affiliates. For instance, it
offers marketing services to sellers for both personal computers and mobile devices
through its online marketing technology platform Alimama. The Company also offers
Cloud Computing services through Alibaba Cloud Computing, Logistics through 48%owned China Smart Logistics, and transaction settlement services through its affiliate
Alipay, to name a few.
The Company is headquartered in Hangzhou, China.
Page 4
Shares
2,341.9
% of Total
--
123.1
26.1
5%
1%
197.0
18.3
2.7
0.9
128.4
8%
1%
0%
0%
5%
2,465.0
2,491.1
---
$9,998
$14,666
$24,664
$164,416
$166,907
$169,398
Page 5
12.28%
Korea
6.56%
5.97%
Germany
France
4.79%
3.80%
Russian Federation
United States
United Kingdom
India
3.45%
2.53%
0.90%
-0.18% Brazil
-17.51%
Japan
Source: iResearch
Page 6
100.0%
88.0%
90.0%
82.0%
80.0%
80.0%
85.0%
63.8%
70.0%
68.0%
64.2%
52.1%
48.9%
60.0%
50.0%
45.8%
40.0%
30.0%
20.0%
10.0%
0.0%
China
US
UK
Japan
Germany
China
US
UK
Japan
Germany
Source: iResearch
China has an underdeveloped offline retail sector. There are 0.6 square meters
of per capita retail space in China versus the U.S. with 2.6 square meters of
retail space per capital. We believe that the retail infrastructure in China is
particularly underdeveloped outside Tier 1 and 2 cities, despite 60% of retail
sales being attributable to regions outside Tier 1 and 2 cities.
1.3
1.3
U.K.
Japan
1.0
0.6
0.5
0.0
China
US
Germany
end solution for e-commerce that would be difficult to replicate and that allows BABA to
operate its business very efficiently and profitably despite modest value capture from its
marketplaces.
Exhibit 6. BABA e-Commerce Platform Stack
Alipay. Founded in 2004 and divested by BABA in early 2011 due to changes in
PRC regulation, Alipay provides payment and escrow services to BABA
marketplace participants free of charge. We believe Alipays services have been
key to establishing trust between buyers and sellers within BABAs marketplaces
and that Alipays provision of payment and escrow services on preferential
terms to BABA serve as a key cost advantage versus competitors.
Page 9
Pay-for-performance (P4P) P4P marketing services are sold on a costper-click basis via an online auction which facilitates price discovery
and, like GOOGLs AdWords, incorporates measures of marketer quality
into its ad ranking algorithms.
Taobao Ad Network and Exchange This is one of Chinas largest realtime online advertising exchanges as well as a proprietary Data
Management Platform for online advertising. To provide context for
U.S. investors, we believe BABAs scale in Chinas Online Marketing
ecosystem is analogous to a combination of GOOGLs AdWords business
in the retail category combined with a large and primarily retailoriented O&O display ad business, a large multi-vertical display ad
network, a large display ad exchange and related DMP technology
offering, and a large commission-based affiliate marketing network.
Source: Taobao.com
collectively operate more than 1,800 distribution centers and more than 97,000
delivery stations and employ more than 1.1M delivery personnel in 600 cities
and 31 provinces of China), allowing marketplace participants to easily navigate
Chinas fragmented logistics landscape.
In the 12 months ended June 30, 2014, China Smart Logistics facilitated the
delivery of 6.1B packages from transactions on BABAs China retail marketplaces
(representing 54% of all package deliveries tracked by the PRC State Post
Bureau over that timeframe and more than the 4.4B packages handled by UPS
globally over the same timeframe) with an average delivery time of three days.
We believe this infrastructure is highly scalablewhile China Smart Logistics
processed 16.6M daily average packages in the twelve months ended June 30,
2014, it was also able to successfully handle 156M packages generated during
BABAs 2013 Singles Day promotion.
Additionally, we believe that BABAs logistics partnership has allowed the
Company to successfully scale its logistics network without onerous capital
requirements. While competitors such as JD and AMZN are investing heavily in
owned logistics capabilities in China, BABAs share of China Smart Logistics
registered capital is approximately $800M, of which BABA has already
contributed approximately $270M. While China Smart Logistics plans to build a
network of logistics hubs and other infrastructure with the aim of supporting
the delivery of over 100M packages per day within 24 hours of an order being
placed, we expect that this infrastructure will primarily be financed via leverage
and that BABAs incremental capital contributions to the JV should be limited.
3. Rare Combination of Massive Scale, Strong Growth and High Margins
We believe that BABA has all the makings of a core large-cap Internet holding, given its
relatively unique combination of high growth (the Company grew revenue 46% YoY in
F1Q15), very high profit margins (58% TTM Adjusted EBITDA margin not including
royalty and services fee income from Alipay), and massive scale (TTM revenue of
approximately $9.9B). Among large cap Internet peers, we believe only FB offers a
similarly attractive combination of growth, profitability and scale. And BABA has one
thing FB doesntexposure to China Internet growth.
Page 11
Exhibit 8. Large Cap Internet Peer Revenue Growth vs. EBITDA Margin
80%
70%
JD
FB
60%
BIDU
50%
BABA
40%
700-HK
30%
PCLN
AMZN
GOOGL
20%
EBAY
10%
0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
Source: Company reports, FactSet and CRT Capital Group LLC estimates. Bubbles scaled by TTM revenue.
Among comparable large-cap Internet peers, only three companies grew revenue faster
than BABA in 2Q14FB, BIDU, and JDand only oneFBdemonstrated higher TTM
EBITDA margin. However, we note that in recent quarters BABA has demonstrated
decelerating/uneven revenue growth and, over the past two quarters, declining EBITDA
marginthis stands in contrast to FBs record of generally accelerating revenue growth
and generally expanding EBITDA margin over the past eight quarters. We believe that
much of the volatility in BABAs revenue growth is attributable to the rapid consumer
shift to mobile, a trend to which many Internet companies have been forced to adapt,
particularly over the past two to three years. While FB adjusted its business model for
mobile in 2012-2013 (and GOOGL began investing in mobile well before that), we
believe BABA is still in the process of adapting its monetization model to mobile.
Page 12
Exhibit 9. Large Cap Internet Peer Revenue Growth, Trailing Eight Quarters
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
3Q12
4Q12
1Q13
GOOGL
FB
EBAY
2Q13
JD
3Q13
700-HK
BIDU
4Q13
BABA
1Q14
AMZN
2Q14
PCLN
Source: Company reports, FactSet and CRT Capital Group LLC estimates.
While BABA ranks second to FB in terms of EBITDA margin, we expect margins to come
down over the next 12-18 months, as BABA invests in growing the business expanding
further into Tier 2 and Tier 3 cities in China, and expanding operations in the U.S. and
Europe.
Exhibit 10. Large Cap Internet Peer EBITDA Margin, Trailing Eight Quarters
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
-10.0%
GOOGL
FB
EBAY
JD
700-HK
BIDU
BABA
BABA is the clear leader in mobile commerce in China, with 86.1% share of total
China mobile commerce in F1Q15, per iResearch, even higher than its
commanding 81% share of the China e-commerce market as a whole.
The Companys Taobao Marketplace mobile application has been the most
popular mobile commerce app in China (in terms of mobile MAU) since August
2012.
BABAs mobile user base continues to grow rapidly. In June 2014, the Company
had 188M mobile monthly active users, up from 163M in March 2014 and 136M
in December 2013.
As we noted above, mobile is a double-edged sword for BABA (as it has been for many
Internet companies): a source of explosive incremental usage growth, but also a nearterm monetization headwind. As illustrated in Exhibit 11 and Exhibit 12, BABAs mobile
China retail GMV has been growing very quickly and mobile share of BABAs total China
retail GMV has been expanding rapidly as well, accounting for nearly 33% of the
Companys total China retail GMV in F1Q15.
Page 14
500%
423%
$25.0 B
450%
430%
382%
400%
366%
$20.0 B
331%
350%
332%
307%
275%
$15.0 B
300%
298%
250%
200%
$10.0 B
150%
100%
$5.0 B
50%
$0.3 B
$0.4 B
$0.9 B
$1.1 B
$1.5 B
$2.0 B
$4.1 B
$5.0 B
$6.6 B
$8.8 B
$16.7 B
$18.9 B
$26.3 B
6/11A
F1Q12A
9/11A
F2Q12A
12/11A
F3Q12A
3/12A
F4Q12A
6/12A
F1Q13A
9/12A
F2Q13A
12/12A
F3Q13A
3/13A
F4Q13A
6/13A
F1Q14A
9/13A
F2Q14A
12/13A
F3Q14A
3/14A
F4Q14A
6/14A
F1Q15A
$0.0 B
0%
YoY Growth
80%
70%
60%
50%
98.6%
98.3%
96.2%
94.4%
92.6%
89.3%
88.0%
85.3%
95.4%
2.5%
3.8%
5.6%
7.4%
10.7%
12.0%
14.7%
4.6%
12/11A
F3Q12A
3/12A
F4Q12A
6/12A
F1Q13A
9/12A
F2Q13A
12/12A
F3Q13A
3/13A
F4Q13A
6/13A
F1Q14A
9/13A
F2Q14A
97.5%
80.3%
72.6%
67.2%
40%
30%
20%
10%
0%
1.4%
6/11A
F1Q12A
1.7%
9/11A
F2Q12A
19.7%
12/13A
F3Q14A
27.4%
3/14A
F4Q14A
32.8%
6/14A
F1Q15A
(though, in the case of GOOGL, the merchant owns the customer relationship and may
drive incremental revenue after initial customer acquisition).
We find BABAs value proposition versus comparable e-commerce platforms even more
remarkable given that payment processing and escrow services from Alipay are offered
essentially free of charge to BABA marketplace merchants. Given our analysis, we
believe that BABA 1) should have the ability to raise GMV-based commission rates
and/or alter elements of its ad products or ad auction to drive take rate higher and
merchant ROI lower while still offering a superior value proposition versus competitors
and market precedents, and 2) as sophistication and competition among third-party
sellers increases, we expect that marketplace merchants will naturally drive BABAs
auction-driven ad pricing up and merchant ROI down over time.
6. Potential Alipay Optionality
BABAs relationship with Alipay is undoubtedly complex, but we believe could offer
additional upside opportunity for BABA shareholders over the longer term. BABA
originally established Alipay in December 2004 to operate the Companys payment
services business and facilitate trust within BABAs marketplaces via the provision of
third-party payment processing and escrow services. In June 2010, the Peoples Bank of
China (PBOC) issued new regulations requiring that non-bank payment companies such
as Alipay obtain a license in order to operate in China, and further stipulated that such
payment companies with foreign ownership would be subject to additional future
regulation and guidelineshowever, such guidelines were never issued by the PBOC.
Given the uncertainties of the regulatory situation, BABA divested its interest in and
control over Alipay in early 2011. Alipays parent company, Small and Micro Financial
Services Company, is now owned by two equity investment vehicles which are owned by
BABAs Executive Chairman Jack Ma, other employees of BABA and Small and Micro
Financial Services Company, and members of the Alibaba Partnership. These equity
investment vehicles are in turn controlled by an entity which is 100% owned by Jack Ma,
essentially providing him with full voting control over Small and Micro Financial Services
Company. After BABAs divestment of its equity interest in Alipay, BABA entered into a
series of agreements which govern the relationship between BABA and Small and Micro
Financial Services Company. We highlight the following key features of the relationship,
as restructured in August 2014:
Page 16
Liquidity Event Payment. In the case of a liquidity event, such as a qualified IPO
of Alipay or Small and Micro Financial Services Company, BABA will be entitled
to receive a payment equal to 37.5% of the equity value of Small and Micro
Financial Services Company.
Potential Equity Interest. BABA is entitled to acquire (and maintain, in the case
of incremental equity issuance to third parties prior to a qualified IPO) up to a
33% equity interest in Small and Micro Financial Services Company if it receives
applicable PRC regulatory approvals. However, ILPA payments would terminate
upon BABA acquiring the 33% stake and would be reduced proportionately for
equity interests acquired below that amount. We believe that the purchase
price of such equity interest would be funded by payments from Small and
Micro Financial Services Company.
Sale of BABAs Micro Loan Business. In August 2014, BABA agreed to transfer
its SME micro loan business and the bulk of its loan portfolio to Small and Micro
Financial Services Company in exchange for cash consideration of $519M. BABA
will also be paid 2.5% of the average daily balance of the micro loan portfolio of
Small and Micro Financial Services Company from 2015-2017 and the 2017 fee
amount from 2018 to 2021. We expect the transfer of the micro loan business
to significantly reduce revenue in BABAs fast-growing Other revenue segment
but to modestly increase Other Income.
In summary, Alipay and its parent company 1) contribute to the value proposition of
BABAs marketplace business by providing payment processing services at preferential
rates, 2) will pay BABA 37.5% of pre-tax income until a liquidity event occurs or BABA is
able to take an equity stake, and 3) could provide investors with additional upside in the
case of an IPO or sale of Alipay or Small and Micro Financial Services Company or a
change in PRC law allowing BABA to take an ownership stake in the company.
In our valuation analysis, we are not assigning explicit value to the potential equity stake
or liquidity event payment at this timeindeed, even if a liquidity event or equity
Page 17
ownership stake by BABA were possible under PRC regulation, it is unclear how the
market might value Alipay or its parent, particularly given the nature of the commercial
agreement with BABA, the fact that BABA accounts for a significant percentage of
Alipays total payment volume (for the twelve months ended June 30, 2014, BABAs
China retail marketplaces accounted for 29.7% of Alipays $778B in total payment
volume) and the fact that the close relationship between BABA and Small and Micro
Financial Services Company has likely fueled much of Alipays growth off of BABAs
marketplaces as well. Alternately, if Alipay were released from its commercial
agreement with BABA, it is unclear how that could impact BABAs payment processing
costs and gross margins, and thus the valuation of the core BABA marketplace business.
However, as Alipay continues to develop its payment business both on and off BABAs
marketplaces and expands into adjacent financial services opportunities (e.g., micro
loans, online banking, remittances, etc.), we feel confident that Small and Micro
Financial Services Company should offer attractive optionality in addition to the value of
BABAs core business.
7. The Opportunity in Tier 3 & Tier 4 Chinese Cities
We believe that there is a big opportunity within China, where BABA can go deeper into
Tier 3+ (cities in more rural parts of China). Tier 1 cities refer to Beijing, Shanghai,
Shenzen, and Guongzhou. Tier 2 cities refer to 32 major cities not including the Tier 1
cities. Outside of the Tier 1 & 2 cities that have populations greater than 1M people,
there are 92 additional cities in China with populations greater than 1M, compared to
the U.S., which only has only 9 cities with populations greater than 1M. We believe that
this is a big opportunity for Alibaba. As of 2012, Tier 1 &2 cities accounted for 255M
people in China (19% of the population) and accounted for about 40% of total retail
sales in China. The rest of China (Tier 3+ cities) had 1.1B people (81% of the population),
and accounted for almost 60% of total China retail sales.
Furthermore, Chinese citizens have been migrating from rural areas to more urban
areas in search of work and better jobs. As a result, Chinas urban population was
greater than its rural population for the first time in 2011 (~690M vs. ~660M). Based on
a McKinsey study from 2012, the exhibit below shows the expected growth of towns
and cities from 2005 to 2025. We believe that the influx of people into the cities and
hence, the increase in the number of urban towns and cities will lead to an increase in
growth and consumption in China. We view this as a positive for BABA for two reasons:
1) As BABA moves to offer its services in more Tier 3 and Tier 4 cities in China, BABA can
monetize Chinas large population that lives outside of Tier 1/2 cities; 2) As those
people move to urban areas over time, we believe that BABA will be in a strong position
to provide eCommerce services to those individuals; and 3) Given that proprietorship
and small businesses are common in China, BABA may be in a strong position to help
those retailers reach Chinas population.
Page 18
Exhibit 13. China Population by City Size And Potential Migration Pattern (Ms)
CAGR, %
100% =
572
6
15
926
52
68
13
2.4%
6.9%
51
11
1.1%
207
34
3.4%
25
2.2%
53
28
109
26
128
101
25
2005
130
4
17
0.3%
23
New Cities
Small (0.5-1.5M)
Big (5-10M)
Mega (10M+)
2025
Midsized (1.5-5M)
Source: Company McKinsey Global Institute China All City Model, McKinsey Global Institute analysis
Furthermore, Tier 2 cities in China have grown significantly and have strong potential to
develop further. One of the key drivers to this growth is the involvement of the Chinese
government through its investment in central China where there is a concentration of
tier 2 cities, to build and develop its infrastructure and transport. And with a better
infrastructure being built out for Tier 3 and Tier 4 cities, we believe that this will create a
large opportunity for Alibaba to penetrate those markets over time.
Page 19
Source: Company McKinsey Global Institute China All City Model, McKinsey Global Institute analysis
Page 20
Page 21
3.53%
3.43%
3.50%
3.03%
2.95%
3.00%
2.50%
2.57%
2.40%
2.46%
2.50%
2.00%
2.77%
2.52%
2.61%
3.05%
3.08%
2.67%
2.57%
3.13%
2.96%
2.94%
2.52%
2.51%
2.31%
3.13%
2.63%
2.77%
2.30%
3.03%
2.88%
2.18%
2.59%
2.34%
2.09%
2.04%
12/14E
F3Q15E
3/15E
F4Q15E
2.14%
2.77%
2.49%
2.44%
12/15E
F3Q16E
3/16E
F4Q16E
2.04%
1.50%
1.00%
1.12%
0.50%
0.00%
0.44%
0.47%
0.55%
0.47%
6/12A
F1Q13A
9/12A
F2Q13A
12/12A
F3Q13A
3/13A
F4Q13A
0.58%
0.61%
6/13A
F1Q14A
9/13A
F2Q14A
PC Take Rate
3.50%
3.00%
12/13A
F3Q14A
1.49%
1.44%
6/14A
F1Q15A
9/14E
F2Q15E
0.98%
3/14A
F4Q14A
3.15%
6/15E
F1Q16E
9/15E
F2Q16E
3.26%
2.76%
2.84%
2.94%
2.66%
2.50%
2.50%
2.55%
2.63%
2.51%
2.31%
2.00%
1.84%
1.50%
1.00%
0.91%
0.50%
0.49%
0.00%
F2013A
F2014A
PC Take Rate
F2015E
Mobile Take Rate
F2016E
F2017E
70%
14.0B
57%
12.0B
10.0B
57%
59%
54%
50%
42%
60%
60%
53%
53%
53%
50%
47%
41%
40%
8.0B
30%
6.0B
20%
4.0B
10%
2.0B
5.8
4.9
6.1
6.5
11.2
5.6
8.6
8.4
13.5
9.7
11.5
11.9
6/12A
9/12A
12/12A
3/13A
6/13A
9/13A
12/13A
3/14A
6/14A
9/14E
12/14E
3/15E
0.0B
0%
EBITDA
EBITDA Margin
Page 24
Investm't/
Acquist'n
Date
Price ($M)
Kabam Inc.
Investment
Jul-14
$120
UCWeb Inc.
Acquisition
Jun-14
NA
Investment
Jun-14
$192
Investment
May-14
$250
AutoNavi
Acquisition
Apr-14
$1,500
Investment
Apr-14
$1,050
20% stake in a leading new media and Internet culture industry group in China
Lyft
Investment
Apr-14
$250
Youku Tudou
Investment
Apr-14
$1,220
TangoMe Inc.
Investment
Mar-14
$215
~20%-25% stake in the mobile messaging and fee-calling app based in Mountain View, California
Acquisition
Mar-14
$804
60% stake in the media Co. that does TV & film production, print, mobile and TV advertising in PRC
Investment
Mar-14
$692
CITIC 21CN Co
Investment
Jan-14
$171
38% stake in the S.I & software developer for drug authentication, tracking and logistics
Goodaymart
Investment
Dec-13
$361
Quixey
Investment
Oct-13
NA
Mountain View, CA based mobile app search company. BABA led the Series C round for $50M
ShopRunner
Investment
Oct-13
NA
Investment
Apr-13
$586
Shenzhen One-Touch
Acquisition
Nov-10
NA
Acquisition
Jun-10
NA
Platform for SMBs to sell across various online sources like AMZN and EBAY
Acquisition
Dec-09
$79
Description
Ride-sharing platform. BABA, Third Point & others invested $250M in Lyft's latest round
18.5% stake in the producer of TV programs and other videos over the Internet
Source: Press, Company Reports and CRT Capital Group LLC estimates.
7. Competition
Alibaba faces intense competition in China on several fronts. On the retail side, BABA
competes with JD.com, NewEgg, Dang Dang, Amazon, Walmart, eBay, and others. On
Search Advertising, BABA competes with Baidu, and on the digital media side, BABA
competes with Tencent, Weibo (although BABA has an investment in Weibo) and
others. Given recent investments in social media and communications and content, we
believe that BABA aspires to transform itself from a eCommerce powerhouse to an allencompassing digital experience platform. But that has significant risks, as we believe
that many of BABAs new ventures are outside its core competencies. As BABA aspires
to enter new International markets like the U.S. and Europe, it will face intense
competition from the likes of Google, Amazon, Apple, Facebook, LinkedIn, Twitter,
Yandex, Mercado Libre, and other well-entrenched businesses.
8. 80%+ Shares To Face Lock Up Expiration In One Year
In the exhibit below, we highlight the three key lock-up expiration dates and percentage
of shares outstanding that these shares represent. 181 days post the offering, about
17% of the shares will be eligible for sale. A year post the offering, about 82% of total
shares will be eligible for sale. This does not include the 128M shares that are available
for sale immediately after the offering and not beholden to lock-up restrictions.
Page 25
Shares
2,465.0
8.1
429.1
1,579.3
2,016.5
12/19/2014
3/19/2015
12/21/2015
Source: Press, Company Reports and CRT Capital Group LLC estimates.
Page 26
120%
106%
120.0B
104%
100%
87%
100.0B
80%
80.0B
60%
55%
60.0B
46%
40%
40%
40.0B
27%
20%
20.0B
3.7
7.7
15.6
29.2
45.1
65.7
91.8
117.1
F2010A
F2011A
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
China Commerce Revenue (B)
YoY Growth
Page 27
Exhibit 20. BABA Historical and Projected China Commerce Retail Revenue
120.0B
120%
101%
100.0B
100%
80.0B
80%
60.0B
60%
59%
47%
41%
40.0B
40%
28%
20.0B
20%
13.4
27.0
42.8
62.8
88.4
113.2
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
China Commerce Retail Revenue (B)
YoY Growth
Page 28
Exhibit 21. BABA China Commerce Retail Online Marketing Services Revenue
35.0B
120%
101%
30.0B
100%
25.0B
80%
20.0B
60%
51%
15.0B
29%
10.0B
40%
20%
5.0B
9.8
19.7
29.7
6.5
8.4
F2012A
F2013A
F2014A
6/13A
6/14A
0.0B
0%
China Commerce Retail - Online Marketing Services (B)
YoY Growth
Online Marketing Services revenue derived from the China Commerce Retail segment
grew 101% YoY in F2013 to 19.7B ($3.2B), and grew 51% YoY to 29.7B ($4.8B)in
F2014. Quarterly reporting to this level of revenue detail in BABAs public filings has
been limited, however, the Company has reported China Commerce Retail Online
Marketing Services revenue for F1Q15 and F1Q14 (ending June 30, 2014 and June 30,
2013, respectively). The trend of revenue deceleration in Online Marketing Services
revenue in F2014 has carried through to F1Q15 results, with YoY revenue growth
decelerating to 29% in F1Q15 from 51% in F2014.
We believe that ongoing deceleration in revenue growth in Online Marketing Services
is due to the greater proportion of GMV generated on mobile devices and lower
monetization of mobile GMV compared to GMV transacted on PCs. We believe that
merchants are allocating a smaller proportion of their budget to purchase online
marketing services on mobile devices relative to the GMV generated on mobile
devices.
Commission Revenue is derived primarily from sellers on Tmall and Juhuasuan who
pay a commission based on a percentage of GMV for transactions settled through
Alipay. Commission percentages typically range from 0.3% to 5% depending on product
category; Alibaba has set commission rates based on the Companys estimate of
industry profit margins in specific product categories (e.g., our research indicates that
that Alibaba generally charges a commission on the order of 5% in the apparel category
and a commission on the order of 1%-2% in the electronics category) and other strategic
considerations. We note that Taobao Marketplace also derives some of its revenue from
lottery commissions, which took on greater prominence in the Companys financial
results with World Cup-related lotteries in C2Q14/F1Q15.
Page 29
120%
114%
12.0B
115%
111%
10.0B
110%
8.0B
105%
6.0B
100%
95%
4.0B
95%
2.0B
90%
2.9
6.2
12.0
1.9
4.0
F2012A
F2013A
F2014A
6/13A
6/14A
0.0B
85%
China Commerce Retail - Commission (B)
YoY Growth
Commission revenue derived from the China Commerce Retail segment grew 111% YoY
in F2013 to 6.2B ($986M) and grew 95% YoY in F2014 to 12.0B ($1.9B). For F1Q15,
Commission revenue grew 114% YoY to 4.0B ($644M). Commission revenue growth
has been driven by strong growth in Tmall GMV (where Commission revenue is the
primary mode of monetization); given that commission rates are identical for
transactions generated from PCs and mobile devices, mobile mix shift has not
represented a headwind for BABAs Commission revenue.
With respect to the Companys strong Commission revenue growth performance in
F1Q15 (+114% YoY), we note that BABA has disclosed that lottery commissions
increased by 372M in F1Q15 (BABA did not report total lottery commission revenue for
the quarter, but rather the increase in commission revenue versus F1Q14); as such, the
YoY increase in lottery commissions alone in F1Q15 accounted for more than 9% of total
Commission revenue in the quarter. BABA has also reported that while its published
commission rates did not change versus the prior-year period, mix shift to product
categories which are charged higher commission rates served as a tailwind for blended
commission take rate in F1Q15. We believe that higher lottery sales in F1Q15 related to
World Cup were also a significant factor in the higher blended commission rate enjoyed
by the Company in F1Q15.
Other Revenue is primarily derived from storefront fees, which are comprised of
monthly subscription fees for Wangpu, Alibabas storefront software. We believe these
fees are primarily derived from Taobao Marketplace. Other Revenue declined 3% YoY to
1.1B ($173M) in F2014 and declined 22% YoY in F1Q15.
Page 30
70%
58%
60%
1.0B
50%
40%
0.8B
30%
0.6B
20%
10%
0.4B
-3%
0%
-10%
0.2B
-22%
0.7
1.1
1.1
0.3
0.2
F2012A
F2013A
F2014A
6/13A
6/14A
0.0B
-20%
-30%
YoY Growth
Exhibit 24 below summarizes the sites and sellers from which Alibaba derives its key
revenue sources in the China Commerce Retail segment. As noted above, in addition to
Online Marketing Services revenue and revenue from Storefront fees, Taobao
Marketplace also derives revenue from lottery commissions.
Exhibit 24. Alibaba Group Historical and Projected China Commerce Retail Revenue
Purchaser of Services
Marketplace / Platform
Tmall Merchants
Taobao Marketplace
Tmall
Juhuasuan
NA
Commissions
Placement Fees
Commissions
P4P Marketing Fees
Display Marketing Fees
Taobaoke Commissions
Commissions
Placement Fees
Page 31
Relatively Stable BABA Market Share. We expect that BABAs China Retail GMV
will grow at a 34% CAGR from F2014 to F2017. We expect that BABA will
modestly grow its share of the China retail e-commerce market from 81.5% in
F2014 to 82.2% in F2015, but that BABAs share will modestly decline through
the remainder of our forecast period, exiting F2017E with 79.7% market share.
Mix shifts within the China e-commerce market inform our forecastmobile
commerce is growing rapidly and BABA is clearly dominant here with
approximately 86% market share, per iResearch. However, branded B2C ecommerce is also growing faster than C2C e-commerce in China, and here BABA
is less dominant, with approximately 60% market share in B2C vs. 90%+ market
share in C2C, again per iResearch.
60%
56%
4,000.0B
50%
3,500.0B
42%
3,000.0B
40%
34%
2,500.0B
30%
2,000.0B
25%
1,500.0B
20%
1,000.0B
10%
500.0B
1,077.2
1,677.6
2,385.8
3,197.6
3,997.0
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
China Retail GMV (B)
YoY Growth
Page 32
Exhibit 26. BABA Historical and Projected China Retail GMV by Platform
2,500.0B
350%
301%
300%
2,000.0B
250%
1,500.0B
200%
194%
150%
1,000.0B
100%
500.0B
69%
42%
79.5
318.5
937.9
1,584.9
2,250.9
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
50%
0%
YoY Growth
2,000.0B
40%
36%
1,800.0B
35%
1,600.0B
30%
1,400.0B
25%
1,200.0B
1,000.0B
20%
800.0B
15%
600.0B
11%
400.0B
10%
8%
7%
5%
200.0B
997.7
1,359.1
1,447.8
1,612.7
1,746.1
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
PC-Based China Retail GMV (B)
YoY Growth
100%
90%
80%
50.4%
70%
60%
50%
43.7%
60.7%
81.0%
92.6%
40%
30%
49.6%
20%
10%
0%
56.3%
39.3%
19.0%
7.4%
F2013A
F2014A
F2015E
F2016E
F2017E
Page 33
Exhibit 27. BABA Historical and Projected China Retail GMV by Marketplace
2,500.0B
120%
100%
99%
2,000.0B
80%
73%
1,500.0B
61%
60%
1,000.0B
39%
500.0B
40%
20%
253.2
504.6
874.7
1,409.1
1,958.5
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
Tmall GMV (B)
YoY Growth
2,500.0B
45%
42%
40%
2,000.0B
35%
30%
29%
1,500.0B
25%
20%
18%
1,000.0B
14%
15%
10%
500.0B
5%
824.0
1,173.0
1,511.1
1,788.5
2,038.5
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
Taobao GMV (B)
YoY Growth
100%
90%
80%
70%
60%
76.5%
69.9%
63.3%
55.9%
51.0%
50%
40%
30%
20%
10%
23.5%
30.1%
36.7%
44.1%
49.0%
0%
F2013A
F2014A
F2015E
F2016E
F2017E
Relatively Stable Take Rate. After expanding 5 bps YoY to 2.55% in F2014, we
are forecasting that BABAs blended take rate (i.e., revenue take rate as a
percentage of GMV transacted) in the China Commerce Retail segment will
grow to 2.63% in F2015E and should reach 2.83% in F2017E. While BABAs take
rate has suffered due to the ongoing consumer adoption of mobile combined
Page 34
3.15%
3.21%
3.26%
2.76%
2.83%
2.94%
2.66%
2.50%
2.50%
2.55%
2.63%
2.50%
2.31%
2.00%
1.84%
1.50%
1.00%
0.91%
0.50%
0.49%
0.00%
F2013A
F2014A
PC Take Rate
F2015E
Mobile Take Rate
F2016E
F2017E
Page 35
Exhibit 29. BABA Quarterly Historical and Projected Take Rate by Platform
4.00%
3.53%
3.53%
3.43%
3.50%
3.03%
2.95%
3.00%
2.50%
2.57%
2.40%
2.46%
2.50%
2.00%
2.77%
2.61%
2.52%
3.05%
3.08%
2.67%
2.57%
3.13%
2.96%
2.94%
2.52%
2.51%
2.31%
3.13%
2.63%
2.77%
2.30%
3.03%
2.88%
2.18%
2.59%
2.34%
2.09%
2.04%
12/14E
F3Q15E
3/15E
F4Q15E
2.14%
2.77%
2.49%
2.44%
12/15E
F3Q16E
3/16E
F4Q16E
2.04%
1.50%
1.00%
1.12%
0.50%
0.00%
0.44%
0.47%
0.55%
0.47%
6/12A
F1Q13A
9/12A
F2Q13A
12/12A
F3Q13A
3/13A
F4Q13A
0.58%
0.61%
6/13A
F1Q14A
9/13A
F2Q14A
PC Take Rate
12/13A
F3Q14A
1.49%
1.44%
6/14A
F1Q15A
9/14E
F2Q15E
0.98%
3/14A
F4Q14A
6/15E
F1Q16E
9/15E
F2Q16E
Taking Buyer Growth Into Account. While we are not utilizing BABAs China
Commerce Retail buyer growth as an explicit driver of our forecasts, we believe
that modeling buyer growth (and GMV per buyer) serves as a useful sanity
check for our forecasts. BABA has reported that the Company had 279M active
buyers (on a trailing twelve-month basis) as of the end of F1Q15, up 51% YoY
and representing a third-consecutive quarter of accelerating active buyer
growth. We believe strong growth in active buyers has been driven by growth in
the Chinese middle class and particularly by growth in mobile Internet usage in
China, where BABA is proving to be particularly dominant. Despite recent
acceleration, we are forecasting a moderation in buyer growth going forward as
BABA increasingly penetrates China Internet user population. We are currently
forecasting that active TTM buyers will grow at a 35% CAGR from F2014 to
F2017E, exiting the forecast period at 622M TTM active buyers. Our forecasted
buyer growth implies flattish-to-down GMV per active buyerwe note that
BABA has reported modest YoY declines in GMV per active buyer over the past
two quarters and we believe continued modest declines are a reasonable
likelihood as BABA increases its penetration of Tier 2 and Tier 3 cities and
outlying regions. Though we believe that shoppers in smaller Chinese cities
generally have fewer and less appealing shopping options than those in large
Chinese cities (i.e., online shopping in general faces less competition from brickand-mortar retail), we also believe that incremental buyers in smaller Chinese
cities may also have lower disposable income to spend within Alibabas
marketplaces.
Page 36
60%
600
50%
48%
500
42%
40%
40%
400
34%
29%
30%
300
20%
200
10%
100
123
172
255
361
482
622
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0%
TTM Active Buyers (MM)
YoY Growth
20%
6,000
16%
15%
5,000
10%
4,000
3,000
5%
5%
2,000
0%
0%
0%
1,000
5,390
6,263
6,579
6,604
6,629
-3%
6,424
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
-5%
GMV Per Active Buyer ()
YoY Growth
30%
28%
4.0B
25%
3.5B
20%
3.0B
16%
2.5B
15%
13%
2.0B
10%
1.5B
5%
5%
1.0B
0%
-1%
0.5B
2.2
2.2
2.3
2.9
3.4
3.9
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
-5%
China Commerce Wholesale Revenue (B)
YoY Growth
2. International Commerce
International Commerce revenue is derived from the operations of Alibabas
International wholesale business (Alibaba.com) and the operation of its International
retail business (primarily Aliexpress.com). International Commerce accounted for 9% of
total Company revenue in F2014, growing 17% YoY to 4.9B. We are currently
forecasting that the International Commerce segment will grow revenue at a 25% CAGR
from F2014 to F2017E, driven by rapid growth in the retail business and modest growth
in the relatively mature wholesale business.
Page 38
35%
9.0B
31%
30%
8.0B
27%
7.0B
23%
24%
6.0B
25%
20%
5.0B
17%
15%
4.0B
3.0B
10%
10%
10%
2.0B
5%
1.0B
2.6
3.4
3.8
4.2
4.9
6.2
7.6
9.4
F2010A
F2011A
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
International Commerce Revenue (B)
YoY Growth
Page 39
Exhibit 34. BABA Historical and Projected International Commerce Wholesale Revenue
6.0B
14%
12%
12%
5.0B
10%
4.0B
8%
3.0B
6%
6%
6%
5%
2.0B
4%
4%
1.0B
2%
3.5
3.8
3.9
4.4
4.7
4.9
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
International Commerce Wholesale Revenue (B)
YoY Growth
160%
4.5B
140%
139%
4.0B
120%
3.5B
100%
3.0B
87%
2.5B
80%
76%
67%
2.0B
55%
1.5B
60%
40%
1.0B
20%
0.5B
0.2
0.4
0.9
1.8
2.9
4.5
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
International Commerce Retail Revenue (B)
YoY Growth
customers were using Alibaba cloud computing services either directly or indirectly
through independent software vendors. Cloud computing revenue represented
approximately 1.5% of total revenue in F2014, growing 19% YoY to 0.8B. However,
segment revenue growth has accelerated over the past two quarters, with revenue up
28% YoY in F4Q14 and up 36% YoY in F1Q15. We are currently forecasting that segment
revenue will grow at a 27% CAGR from F2014 to F2017E.
Exhibit 36. BABA Historical and Projected Cloud Computing Revenue
1.8B
35%
31%
1.6B
1.4B
30%
26%
26%
1.2B
25%
23%
1.0B
20%
19%
0.8B
15%
0.6B
10%
0.4B
5%
0.2B
0.5
0.7
0.8
1.0
1.3
1.6
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
0%
Cloud Computing Revenue (B)
YoY Growth
4. Other Revenue. Other Revenue accounted for 3.3% of total revenue in F2014. The
Other Revenue segment was Alibabas fastest-growing business line in F2014, growing
224% YoY to 1.7B. BABA has reported that Other segment revenue is primarily derived
from interest income on the Companys micro loan portfolio. As of the end of F1Q15,
the Companys small and medium-sized enterprise (SME) micro loan business had over
400,000 borrowers with a total outstanding loan balance of 14.6B. In August, as part of
the broader restructuring of its relationship with Small and Micro Financial Services
Company and Alipay, BABA agreed to dispose of the SME loan business in exchange for
cash consideration of 3.2B (to be paid no later than the second anniversary of the
closing of the transaction or an IPO of Small and Micro Financial Services Company) and
annual fees over a term of seven years (2.5% of the average daily balance of the SME
loans made by Small and Micro Financial Services Company for calendar years 20152017; an annual fee equal to the annual fee paid in C2017 for C2017-C2021). However,
for regulatory reasons, BABA will retain approximately 3.2B of the existing SME loan
portfolio, which will be wound down over time as the loans are repaid. BABA expects
the transaction to complete closing conditions and regulatory approvals in
C4Q14/F3Q15. We expect that loan receivables will continue to build during F2Q15
before being reduced to 3.2B by the sale of the SME micro loan business in F3Q15, and
that the portfolio balance will decline rapidly thereafter given the generally short-term
nature of SME micro loans (loan terms are generally in the range of 7 to 360 days, per
Company reports). As with royalty and technology services fees currently paid by Alipay,
we expect that the fees to be paid by Small and Micro Financial Services Company with
respect to the transferred SME loan business will be recognized as Other Income, and
not as revenuein any case, we believe that the fees to be paid by Small and Micro
Page 41
Financial Services to BABA with respect to the SME loan business will be far smaller than
the revenue which BABA would have recognized had it retained the business. Based
upon our interpretation of BABAs public filings and our research into the average
interest rate charged on micro loans by BABAwe believe interest rates are typically in
the range of 18-21% on an annualized basiswe believe that SME micro loans currently
generate roughly 90% of segment revenue and that this revenue stream will decline
rapidly following the transfer of the business to Small and Micro Financial Services
Company. We are currently forecasting that Other revenue will grow 28% YoY in F2015E
(down from 224% YoY growth in F2014E), decline by 79% in F2016E and grow 2% YoY in
F2017E.
Exhibit 37. BABA Historical and Projected Other Revenue
2.5B
500%
400%
400%
2.0B
300%
224%
1.5B
200%
100%
1.0B
28%
0.5B
2%
-79%
0%
-100%
0.1
0.5
1.7
2.2
0.5
0.5
F2012A
F2013A
F2014A
F2015E
F2016E
F2017E
0.0B
-200%
Other Revenue (B)
YoY Growth
Page 42
Valuation
Our $95 Target Price is based the average of our 2016 EV/EBITDA and C2016 Adjusted
P/E Valuation methodologies.
Using an EV/EBITDA analysis, if we apply a 26x multiple to our 2016 Adjusted EBITDA
estimate of $8.3B, adjusting for $35.9B in calendar year-end 2015 cash and $9.9B in
calendar year-end 2015 debt, we derive a valuation of $91 per share. Our target multiple
is derived from historical and future growth assumptions, comparable public company
multiples, and various intangibles like management, product pipeline, defensible
business model, etc. For context, we estimate that BABAs stock would trade at 19x our
C2015 EV/EBITDA estimate, if the stock prices at the high end of the range at $68. We
note that the median of the U.S. Internet comps is 16x 2015 EV/EBITDA, and the median
of the Chinese Internet comps is 19x.
Using a P/E analysis, if we apply a 32x multiple to our 2016 Adjusted P/E estimate of
$3.04, this would imply a $97 target price. For context, BABA would trade at 22x our
C2015 EPS estimate if the stock prices at the high end of the range. We note that the
median P/E of the U.S. Internet comps is 36x, and the median of the Chinese Internet
comps is 25x.
The average of these two methodologies yields a target price of $94.30, which we round
to $95 for convenience.
We note that BABA is growing faster than all of the large cap Internet comps, including
FB, GOOG, AMZN and EBAY. And while BABA is growing more slowly than some of its
Chinese comps, it is significantly more profitable than most of its Chinese peers.
Exhibit 38. BABA Valuation Sensitivity Analysis
CY2016 EV/EBITDA Multiple Range
18x
20x
22x
24x
26x
28x
30x
32x
34x
36x
38x
x CY 2016 EBITDA
$8,286
$8,286
$8,286
$8,286
$8,286
$8,286
$8,286
$8,286
$8,286
$8,286
$8,286
= Enterprise Value
$149,149
$165,721
$182,293
$198,865
$215,437
$232,009
$248,581
$265,153
$281,725
$298,297
$314,869
+ C4Q15 Cash
$35,905
$35,905
$35,905
$35,905
$35,905
$35,905
$35,905
$35,905
$35,905
$35,905
$35,905
- C4Q15 Debt
$9,937
$9,937
$9,937
$9,937
$9,937
$9,937
$9,937
$9,937
$9,937
$9,937
$9,937
$175,117
$191,689
$208,261
$224,833
$241,405
$257,977
$274,550
$291,122
$307,694
$324,266
$340,838
= Market Capitalization
/ C4Q15 Shares
2,648
2,648
2,648
2,648
2,648
2,648
2,648
2,648
2,648
2,648
2,648
$66
$72
$79
$85
$91
$97
$104
$110
$116
$122
$129
24x
26x
28x
30x
32x
34x
36x
38x
40x
42x
44x
$3.04
$3.04
$3.04
$3.04
$3.04
$3.04
$3.04
$3.04
$3.04
$3.04
$3.04
$73
$79
$85
$91
$97
$104
$110
$116
$122
$128
$134
Page 43
Ticker
Rating
Price
Target
Price
Shares
Out.
Market
Cap
EV
2014
BABA
Buy
$95
$68.00
2,491
169,388
157,709
14.3x
10.4x
8.0x
27.3x
19.0x
13.9x
34.5x
25.7x
19.2x
37.3x
22.3x
17.2x
36%
35%
59%
52%
$588.78
$76.08
$327.76
$51.61
$50.83
686
2,615
461
1,310
596
404,117
198,949
151,097
67,609
30,275
344,127
185,319
146,230
61,869
28,379
5.2x
15.0x
1.6x
3.4x
21.2x
4.4x
11.6x
1.3x
3.0x
13.0x
3.8x
9.8x
1.1x
2.6x
8.5x
13.2x
22.7x
23.4x
10.6x
117.9x
11.1x
18.3x
16.4x
9.2x
57.1x
9.5x
15.5x
13.3x
7.9x
32.4x
27.4x
60.8x
NM
NM
NM
21.4x
48.1x
116.0x
19.0x
NM
17.7x
40.8x
61.2x
16.7x
NM
22.0x
44.1x
148.6x
17.3x
NM
17.8x
35.7x
56.4x
15.4x
132.5x
15.1x
30.7x
36.9x
13.7x
60.6x
18%
34%
20%
14%
71%
17%
35%
28%
13%
126%
41%
61%
7%
34%
11%
39%
66%
7%
32%
18%
MEDIAN
MEAN
5.2x
9.3x
4.4x
6.7x
3.8x
5.2x
22.7x
37.5x
16.4x
22.4x
13.3x
15.7x
44.1x
44.1x
34.7x
51.1x
29.3x
34.1x
33.0x
58.0x
35.7x
51.6x
30.7x
31.4x
20%
32%
28%
44%
34%
31%
32%
33%
143,656
71,609
28,224
9,946
3,643
1,168
11.1x
9.0x
1.5x
7.6x
11.1x
0.9x
9.0x
6.4x
1.0x
5.2x
7.7x
0.7x
7.4x
5.0x
0.7x
4.0x
5.5x
0.6x
26.3x
27.7x
NM
27.4x
NM
48.3x
20.7x
19.3x
NM
16.2x
44.4x
18.2x
16.5x
14.4x
60.2x
11.5x
20.9x
10.1x
36.6x
36.6x
NM
43.1x
NM
56.5x
28.7x
26.6x
NM
24.9x
87.0x
19.6x
22.7x
19.6x
NM
16.2x
31.7x
9.2x
37.0x
35.2x
NM
31.4x
NM
51.8x
27.6x
25.1x
NM
19.9x
66.5x
19.7x
22.0x
18.5x
90.1x
14.4x
28.2x
8.7x
25%
40%
49%
55%
52%
24%
34%
31%
-68%
---
36%
42%
0%
27%
-10%
-2%
42%
32%
-2%
28%
1%
2%
MEDIAN
MEAN
8.3x
6.9x
5.8x
5.0x
4.5x
3.9x
27.5x
32.4x
19.3x
23.8x
15.5x
22.3x
39.9x
43.2x
26.6x
37.4x
19.6x
19.9x
36.1x
38.9x
25.1x
31.8x
20.3x
30.3x
45%
41%
34%
44%
14%
15%
15%
17%
China Internet
Tencent Hol di ngs Ltd.
700-HK
Ba i du, Inc.
BIDU
JD.com, Inc.
JD
Qi hoo 360 Technol ogy Co., Ltd.
QIHU
Wei bo Corp.
WB
E-Commerce Chi na Da ngda ng, Inc.DANG
Not Ra ted
Not Ra ted
Not Ra ted
Not Ra ted
Not Ra ted
Not Ra ted
NA
NA
NA
NA
NA
NA
$15.73
$215.57
$27.80
$77.97
$21.55
$13.05
9,361
351
1,203
131
192
110
147,249
75,581
33,437
10,240
4,142
1,430
EV/Sales
2015
2016
2014
EV/EBITDA
2015
2016
2014
GAAP P/E
2015
2016
Non-GAAP P/E
2014
2015
2016
2012-15 CAGR
Sales EBITDA
EBITDA Mgn.
2013 2014
Source: Company reports and CRT Capital Group LLC estimates. Priced as of the market close on September 16, 2014.
Page 44
Management
Jack Yun Ma Executive Chairman
Jack Ma is the lead founder and has served as the executive chairman since May 2013.
From the inception of the Company in 1999 to May 2013, Jack served as the chairman
and chief executive officer. Jack currently serves on the board of SoftBank Corp. Mr. Ma
graduated from Hangzhou Teachers Institute with a major in English language
education and taught English in China prior to founding Alibaba.
Joseph C. Tsai Executive Vice Chairman
Joe joined the company in 1999 as a member of the Alibaba Group founding team and
has served as the companys executive vice chairman since May 2013. Joe previously
served as the chief financial officer and has been a member of the board of directors
since 1999. From 1995 to 1999, Mr. Tsai worked in Hong Kong with Investor AB. Prior to
that, he was vice president and general counsel of Rosecliff, Inc., in New York. From
1990 to 1993, Joe was an associate attorney in the tax group of Sullivan & Cromwell LLP,
a New York-based international law firm. He received his bachelors degree in
Economics and East Asian Studies from Yale College and a J.D. degree from Yale Law
School.
Jonathan Zhaoxi Lu Chief Executive Officer
Mr. Lu will serve as a director upon the completion of the offering. He joined Alibaba
Group in 2000 and succeeded Jack Ma as chief executive officer in May 2013, and has
served as the top executive officer of several of the companys key business units. Prior
to his current role, he served as the chief data officer and also oversaw the YunOS
division. He joined Taobao in January 2008 and served as its chief executive officer from
January 2010 to June 2011. In September 2004, he became Alipays first president. From
2000 to 2004 he held several leadership positions at Alibaba.com and managed its South
China sales region. Before joining Alibaba Group, he was the co-founder of a network
communications company. Mr.Lu received a graduate certificate in hotel management
from Guangzhou University and a masters degree in business administration from China
Europe International Business School.
Daniel Yong Zhang Chief Operating Officer
Mr. Zhang will also serve as a director upon completion of the offering. He has been the
chief operating officer since September 2013. Before that, he was appointed president
of Tmall.com in June 2011, and chief financial officer of Taobao from August 2007 until
June 2011. Before joining Alibaba Group, he served as the chief financial officer of
Shanda Interactive Entertainment Limited, from August 2005 to August 2007. From
2002 to 2005, he was a senior manager of PricewaterhouseCoopers Audit and Business
Advisory Division in Shanghai, prior to which he worked for Arthur Andersen for seven
years. He received a bachelors degree in finance from Shanghai University of Finance
and Economics, and he is a member of the Chinese Institute of Certified Public
Accountants.
Page 45
Financial Model
Our historical and projected income statement, balance sheet and cash flow statement
for BABA are included on the following pages. We note that select quarterly data for
the financial statements have not been provided by the company.
Page 46
F1Q13A
6/12A
6,793
5,028
573
F2Q13A
9/12A
7,457
5,600
552
F3Q13A
12/12A
11,593
9,588
584
155
63
1,087
164
92
1,193
Cos t of revenue
2,158
Gross Profit
4,635
Operating Expenses
Product Devel opment
Sa l es a nd Ma rketi ng
Genera l a nd Admi ni s tra ti ve
Amorti za ti on of Inta ngi bl e As s ets
Impa i rment of goodwi l l a nd i nta ngi bl e a s s ets
Ya hoo TIPLA Amendment Pa yment
Operating Income
(FYE March 31; RMB in millions, except share and per share amounts)
Total Revenue
Chi na Commerce Reta i l Revenue (Ta oba o, Tma l l , Juhua s ua n)
Chi na Commerce Whol es a l e Revenue (1688.com)
Interna ti ona l Commerce Reta i l Revenue (Al i Expres s )
Interna ti ona l Commerce Whol es a l e Revenue (Al i ba ba .com)
Cl oud computi ng a nd Internet i nfra s tructure Revenue
Other Revenue
Total Revenue ($B)
165
162
1,855
F4Q13A
3/13A
8,674
6,754
488
128
915
166
223
1,388
F1Q14A
6/13A
10,778
8,667
526
179
938
174
294
1,724
F2Q14A
9/13A
10,950
8,645
568
212
964
190
371
1,752
2,373
2,911
2,277
2,727
5,084
8,682
6,397
8,051
2,290
848
869
537
36
0
0
6,190
888
974
804
37
0
3,487
3,622
1,163
1,249
1,003
32
175
0
1,945
854
521
545
25
0
0
2,345
(1,106)
5,060
4,452
F2Q15E
9/14E
15,673
12,394
738
413
1,089
251
787
2,508
F3Q14A
12/13A
18,745
16,149
612
253
1,011
196
524
2,999
F4Q14A
3/14A
12,031
9,371
594
285
1,009
213
559
1,925
F3Q15E
12/14E
25,431
22,296
765
468
1,112
255
536
4,069
F4Q15E
3/15E
18,252
15,446
731
513
1,090
275
198
2,920
F1Q16E
6/15E
21,278
18,176
851
627
1,178
302
144
3,404
F2Q16E
9/15E
21,495
18,334
871
703
1,155
319
114
3,439
F3Q16E
12/15E
33,534
30,273
880
773
1,179
321
109
5,365
F4Q16E
3/16E
24,873
21,620
826
821
1,155
343
109
3,980
3,001
4,171
3,470
4,585
4,388
6,104
5,173
6,080
5,911
7,880
6,925
7,949
14,574
8,561
11,186
11,285
19,328
13,079
15,198
15,584
25,653
17,948
2,631
1,018
713
865
35
0
0
2,701
1,168
657
793
39
44
0
5,773
1,707
1,897
2,046
123
0
0
3,110
1,200
1,278
514
118
0
0
4,342
1,952
1,212
944
234
0
0
4,795
2,038
1,411
1,097
250
0
0
7,727
3,179
2,950
1,348
250
0
0
5,415
2,190
1,734
1,241
250
0
0
5,825
2,489
1,915
1,170
250
0
0
5,817
2,450
1,827
1,290
250
0
0
9,204
3,689
3,521
1,744
250
0
0
6,095
2,612
1,990
1,244
250
0
0
5,420
5,248
8,801
5,451
F2012A
20,025
13,422
2,215
223
3,542
515
108
3,204
F2013A
34,517
26,970
2,197
392
3,768
650
540
5,523
F2014A
52,504
42,832
2,300
938
3,913
773
1,748
8,401
F2015E
75,128
62,775
2,943
1,753
4,402
1,016
2,239
12,020
F2016E
101,179
88,402
3,427
2,923
4,666
1,285
476
16,189
F2017E
128,553
113,185
3,873
4,530
4,899
1,581
485
20,569
6,554
9,719
13,369
20,250
26,796
33,456
13,471
24,798
39,135
54,878
74,383
95,098
8,456
2,897
3,058
2,211
155
135
0
14,047
3,753
3,613
2,889
130
175
3,487
14,215
5,093
4,545
4,218
315
44
0
22,280
9,359
7,307
4,630
984
0
0
26,941
11,240
9,253
5,447
1,000
0
0
30,286
13,137
9,659
6,440
1,050
0
0
6,844
6,489
11,601
7,664
9,373
9,767
16,450
11,853
5,015
10,751
24,920
32,598
47,443
64,812
466
(1,081)
241
6,828
(410)
711
500
(400)
860
500
(400)
1,203
500
(400)
1,254
500
(400)
1,333
500
(400)
1,390
500
(400)
1,687
500
(400)
1,761
258
(68)
327
39
(1,572)
894
1,648
(2,195)
2,429
8,328
(1,610)
4,028
2,000
(1,600)
6,122
2,000
(1,600)
8,572
5,046
13,973
7,450
12,904
9,018
10,806
11,256
18,237
13,714
5,532
10,112
26,802
43,344
53,965
73,784
591
1,445
745
1,290
902
1,297
1,351
2,188
1,646
842
1,457
3,196
4,382
6,482
11,068
(7)
(90)
(80)
(70)
(60)
(50)
(40)
(30)
(20)
(25)
(6)
(203)
(300)
(140)
(100)
12,438
34
12,404
6,625
18
6,607
11,543
32
11,512
8,056
22
8,034
9,460
26
9,434
9,865
27
9,838
16,018
44
15,975
12,048
33
12,016
4,665
437
4,228
8,649
117
8,532
23,403
88
23,315
38,662
106
38,556
47,343
130
47,213
62,616
171
62,445
(8)
(52)
12,344
6,607
11,512
8,034
9,434
9,838
15,975
12,016
0
0
4,228
(17)
(111)
8,404
(31)
(208)
23,076
(8)
(52)
38,496
Income Ta x Expens es
Ea rni ngs i n Equi ty Inves tees
Net Income
Net Income Attri buta bl e to Noncontrol l i ng i nteres ts
Net Income Attri buta bl e to Al i ba ba Group Hol di ng Li mi ted
Accreti on of converti bl e preference s ha res
Di vi dends a ccrued on converti bl e preference s ha res
Net Income Attributable to Ordinary Shareholders
1,847
(1,558)
4,094
4,266
1,722
(1,560)
4,045
4,197
4,448
(4)
4,444
(8)
(52)
4,384
4,937
8,357
5,661
4,883
8,266
5,543
47,213
62,445
2.02
1.93
5.62
5.20
2.65
2.62
4.58
4.52
3.16
3.12
3.68
3.63
3.80
3.75
6.11
6.03
4.55
4.50
1.71
1.67
3.66
3.57
10.61
10.00
15.80
15.37
18.13
17.91
23.10
23.24
Shares Outstanding
Ba s i c
Di l uted
2,170
2,272
2,196
2,374
2,491
2,523
2,516
2,548
2,541
2,573
2,566
2,598
2,591
2,623
2,616
2,648
2,641
2,673
2,473
2,532
2,296
2,354
2,175
2,308
2,436
2,505
2,604
2,636
2,704
2,686
2,097
2,430
4,834
4,508
4,583
5,893
10,463
5,402
7,317
3.08
0.49
8,048
3.19
0.51
13,016
5.11
0.82
9,579
3.72
0.60
11,033
4.25
0.68
11,488
4.38
0.70
17,691
6.68
1.07
13,771
5.15
0.82
6,209
2.45
0.39
13,700
5.82
0.93
26,606
11.53
1.84
37,960
15.16
2.43
53,935
20.46
3.27
69,808
25.99
4.16
Adjusted EBITDA
Adjusted EBITDA ($B)
2,852
456
3,073
492
5,774
924
4,908
785
6,094
975
6,505
1,041
11,246
1,799
5,617
899
8,574
1,372
8,360
1,338
13,547
2,168
9,685
1,550
11,469
1,835
11,938
1,910
18,696
2,991
14,174
2,268
7,274
1,164
16,607
2,657
29,462
4,714
40,166
6,427
56,277
9,004
74,646
11,943
0
Growth
Revenue - YoY
Revenue - QoQ
Gros s Profi t - YoY
Opera ti ng Income - YoY
Net Income - YoY
Adjus ted EBITDA - YoY
65.6%
33.6%
68.7%
165.0%
106.6%
84.5%
71.3%
9.8%
74.6%
--127.3%
78.8%
55.5%
94.8%
158.7%
154.6%
124.1%
70.6%
-25.2%
90.7%
227.6%
187.5%
172.8%
58.7%
24.3%
73.7%
131.1%
140.8%
113.7%
46.8%
1.6%
56.4%
-574.5%
-416.9%
111.7%
61.7%
71.2%
67.9%
73.9%
104.1%
94.8%
38.7%
-35.8%
33.8%
22.4%
32.7%
14.4%
46.3%
31.1%
38.9%
26.3%
179.6%
40.7%
43.1%
-0.6%
42.0%
23.7%
34.2%
28.5%
35.7%
62.3%
32.6%
31.8%
38.1%
20.5%
51.7%
-28.2%
52.8%
40.6%
42.3%
72.4%
34.9%
16.6%
35.9%
37.0%
-23.9%
33.8%
37.1%
1.0%
38.1%
50.5%
48.9%
42.8%
31.9%
56.0%
32.7%
41.8%
38.8%
38.0%
36.3%
-25.8%
37.2%
54.7%
49.6%
46.3%
68.2%
-60.3%
279.3%
190.1%
141.7%
72.4%
-84.1%
114.4%
85.4%
128.3%
52.1%
-57.8%
131.8%
170.6%
77.4%
43.1%
-40.2%
30.8%
65.2%
36.3%
34.7%
-35.5%
45.5%
22.5%
40.1%
27.1%
-27.8%
36.6%
32.3%
32.6%
% of Revenue
Product Devel opment
Sa l es a nd Ma rketi ng
Genera l a nd Admi ni s tra ti ve
12.5%
12.8%
7.9%
11.9%
13.1%
10.8%
10.0%
10.8%
8.7%
9.8%
6.0%
6.3%
9.4%
6.6%
8.0%
10.7%
6.0%
7.2%
9.1%
10.1%
10.9%
10.0%
10.6%
4.3%
12.4%
7.7%
6.0%
13.0%
9.0%
7.0%
12.5%
11.6%
5.3%
12.0%
9.5%
6.8%
11.7%
9.0%
5.5%
11.4%
8.5%
6.0%
11.0%
10.5%
5.2%
10.5%
8.0%
5.0%
14.5%
15.3%
11.0%
10.9%
10.5%
8.4%
9.7%
8.7%
8.0%
12.5%
9.7%
6.2%
11.1%
9.1%
5.4%
10.2%
7.5%
5.0%
68.2%
34.5%
42.0%
68.2%
-14.8%
41.2%
74.9%
43.6%
49.8%
73.7%
51.3%
56.6%
74.7%
50.3%
56.5%
11.7%
72.6%
47.9%
59.4%
--
77.7%
47.0%
60.0%
--
71.2%
45.3%
46.7%
--
70.9%
43.4%
54.4%
10.3%
72.0%
41.4%
53.3%
10.0%
76.0%
45.6%
53.3%
10.0%
71.7%
42.0%
53.1%
10.0%
71.4%
44.1%
53.9%
12.0%
72.5%
45.4%
55.5%
12.0%
76.5%
49.1%
55.8%
12.0%
72.2%
47.7%
57.0%
12.0%
67.3%
25.0%
36.3%
15.2%
71.8%
31.1%
48.1%
14.4%
74.5%
47.5%
56.1%
11.9%
73.0%
43.4%
53.5%
10.1%
73.5%
46.9%
55.6%
12.0%
74.0%
50.4%
58.1%
15.0%
Margin
Gros s Ma rgi n
Opera ti ng Ma rgi n
Adjus ted EBITDA Ma rgi n
Ta x Ra te
Source: Compa ny reports a nd CRT Ca pi ta l Group LLC es ti ma tes
Page 47
F1Q13A
6/12A
F2Q13A
9/12A
F4Q13A
3/13A
30,396
2,290
3,687
4,426
629
1,734
43,162
F1Q14A
6/13A
F2Q14A
9/13A
F3Q14A
12/13A
41,714
7,248
4,244
12,434
1,207
2,980
69,827
F4Q14A
3/14A
33,045
10,587
4,921
13,159
1,442
4,679
67,833
F1Q15A
6/14A
51,912
5,970
6,118
14,642
1,737
7,145
87,524
F2Q15E
9/14E
120,296
5,970
6,118
16,292
1,737
7,101
157,514
F3Q15E
12/14E
155,860
5,970
6,118
3,244
1,737
11,522
184,450
F4Q15E
3/15E
161,442
5,970
6,118
1,622
1,737
8,269
185,158
F1Q16E
6/15E
177,994
5,970
6,118
406
1,737
9,640
201,864
F2Q16E
9/15E
189,351
5,970
6,118
203
1,737
9,738
213,117
F3Q16E
12/15E
218,439
5,970
6,118
0
1,737
15,192
247,457
F4Q16E
3/16E
225,961
5,970
6,118
0
1,737
11,269
251,055
F2012A
16,857
4,887
3,312
581
593
1,669
27,899
F2013A
30,396
2,290
3,687
4,426
629
1,734
43,162
F2014A
33,045
10,587
4,921
13,159
1,442
4,679
67,833
F2015E
161,442
5,970
6,118
1,622
1,737
8,269
185,158
F2016E
225,912
5,970
6,118
0
1,737
11,269
251,006
F2017E
294,640
5,970
7,773
0
1,737
14,317
324,438
1,555
242
1,496
3,808
1,895
334
11,294
63,786
13,009
1,095
2,041
5,973
1,863
1,610
11,640
107,058
17,666
3,023
2,087
5,581
1,660
1,906
11,793
111,549
24,443
3,190
2,409
6,738
1,650
5,950
29,289
161,193
24,443
3,190
2,306
7,438
1,650
5,700
29,289
231,530
24,443
3,190
3,207
8,827
1,650
5,450
29,289
260,507
24,443
3,190
2,718
9,666
1,650
5,200
29,289
261,314
24,443
3,190
3,194
10,701
1,650
4,950
29,289
279,282
24,443
3,190
3,106
11,728
1,650
4,700
29,289
291,222
24,443
3,190
4,140
13,610
1,650
4,450
29,289
328,230
24,443
3,190
3,639
14,834
1,650
4,200
29,289
332,299
1,642
248
1,466
2,463
1,701
355
11,436
47,210
1,555
242
1,496
3,808
1,895
334
11,294
63,786
17,666
3,023
2,087
5,581
1,660
1,906
11,793
111,549
24,443
3,190
2,718
9,666
1,650
5,200
29,289
261,314
24,443
3,190
3,639
14,834
1,650
4,200
29,289
332,250
24,443
3,190
3,639
21,907
1,650
4,200
29,289
412,755
3,350
2,098
259
1,315
8,961
3,083
4,929
23,995
1,200
8,884
451
2,073
13,544
7,879
6,306
40,337
1,100
9,264
1,267
2,659
11,887
4,711
6,496
37,384
4,241
8,831
1,253
2,930
15,347
5,832
6,596
45,030
4,241
8,831
1,253
2,930
14,689
5,796
6,746
44,486
4,241
8,831
1,253
2,930
20,430
9,404
6,896
53,985
4,241
8,831
1,253
2,930
17,316
6,750
7,046
48,366
4,241
8,831
1,253
2,930
20,350
7,868
7,196
52,669
4,241
8,831
1,253
2,930
19,786
7,949
7,346
52,335
4,241
8,831
1,253
2,930
26,378
12,401
7,496
63,529
4,241
8,831
1,253
2,930
23,180
9,198
7,646
57,279
1,283
0
375
339
4,659
745
4,350
11,751
3,350
2,098
259
1,315
8,961
3,083
4,929
23,995
1,100
9,264
1,267
2,659
11,887
4,711
6,496
37,384
4,241
8,831
1,253
2,930
17,316
6,750
7,046
48,366
4,241
8,831
1,253
2,930
23,180
9,198
7,646
57,279
4,241
8,831
1,253
2,930
28,940
11,686
7,646
65,528
Deferred revenue
Deferred tax l i a bi l i ties
Redeema bl e Preference Sha res
Non-current ba nk borrowi ngs
Other l i a bi l i ties
Total Liabilities
Mezza ni ne Equi ty
Shareholders' Equity
389
643
5,191
22,462
60
52,740
10,533
513
396
1,774
0
30,226
72
72,805
10,361
23,892
428
2,136
0
30,711
72
70,731
10,401
30,417
452
2,986
0
49,033
1,850
99,351
10,458
51,384
476
2,986
0
49,033
1,850
98,831
0
132,699
500
2,986
0
49,033
1,850
108,354
0
152,152
524
2,986
0
49,033
1,850
102,759
0
158,555
548
2,986
0
49,033
1,850
107,086
0
172,196
572
2,986
0
49,033
1,850
106,776
0
184,446
596
2,986
0
49,033
1,850
117,994
0
210,236
620
2,986
0
49,033
1,850
111,768
0
220,531
529
413
0
0
104
12,797
30
34,383
389
643
5,191
22,462
60
52,740
10,533
513
428
2,136
0
30,711
72
70,731
10,401
30,417
524
2,986
0
49,033
1,850
102,759
0
74,675
620
2,986
0
49,033
1,850
111,768
0
124,543
720
2,986
0
49,033
1,850
120,117
0
187,379
Page 48
F4Q13A
3/13A
F1Q14A
6/13A
F2Q14A
9/13A
F3Q14A
12/13A
F4Q14A
3/14E
F4Q15E
3/15E
8,056
2,021
0
0
0
0
498
250
1,273
0
0
0
0
0
0
(3,158)
0
1,622
839
0
0
(3,114)
(2,655)
150
6,919
F1Q16E
6/15E
9,460
2,096
0
0
0
0
523
250
1,323
0
0
0
0
0
0
6,555
0
1,217
1,035
0
0
3,034
1,119
150
18,110
F2Q16E
9/15E
9,865
2,171
0
0
0
0
548
250
1,373
0
0
0
0
0
0
895
0
203
1,026
0
0
(564)
80
150
12,931
F3Q16E
12/15E
16,018
2,246
0
0
0
0
573
250
1,423
0
0
0
0
0
0
13,280
0
203
1,883
0
0
6,592
4,452
150
31,544
F4Q16E
3/16E
12,048
2,321
0
0
0
0
598
250
1,473
0
0
0
0
0
0
(5,026)
0
0
1,224
0
0
(3,197)
(3,203)
150
9,343
F2012A
4,665
2,822
(24)
138
264
3
715
155
1,254
0
135
3
25
150
4
1,788
(113)
(226)
(240)
230
94
1,332
583
128
9,275
F2013A
8,649
2,691
(68)
(80)
245
(8)
805
130
1,259
0
175
3
6
104
120
3,136
(974)
(2,828)
(354)
(116)
976
3,657
2,338
437
14,476
F2014A
23,403
7,469
3
(90)
21
(387)
1,339
315
2,844
1,269
44
0
203
1,466
442
(4,493)
(1,329)
(9,175)
(3,567)
1,008
1,344
3,992
1,628
1,606
26,379
F2015E
38,662
1,800
0
(207)
(6,251)
43
1,842
984
4,742
0
0
(5)
90
473
89
21,061
(286)
11,448
3,156
(15)
271
3,875
2,039
574
61,523
F2016E
47,343
8,834
0
0
0
0
2,242
1,000
5,592
0
0
0
0
0
0
15,703
0
1,622
5,168
0
0
5,865
2,448
600
71,880
F2017E
62,611
9,568
0
0
0
0
2,342
1,084
6,142
0
0
0
0
0
0
5,964
(974)
0
(354)
(116)
976
3,657
2,338
437
78,143
5,033
(180)
11
(14)
0
(152)
(1,155)
0
(2,471)
0
1
(11,483)
0
(10,410)
0
0
0
0
0
0
(1,148)
0
0
0
0
0
0
(1,148)
0
0
0
0
0
0
(1,862)
0
0
0
0
0
0
(1,862)
0
0
0
0
0
0
(1,337)
0
0
0
0
0
0
(1,337)
0
0
0
0
0
0
(1,558)
0
0
0
0
0
0
(1,558)
0
0
0
0
0
0
(1,574)
0
0
0
0
0
0
(1,574)
0
0
0
0
0
0
(2,456)
0
0
0
0
0
0
(2,456)
0
0
0
0
0
0
(1,822)
0
0
0
0
0
0
(1,822)
3,728
(2,108)
167
(508)
1,966
(1,419)
(749)
1
(191)
(20)
(305)
(761)
74
(125)
2,589
334
(12)
(60)
26
(1,457)
(1,046)
301
(52)
551
(344)
(452)
167
545
(8,304)
199
(147)
(2,972)
372
(1,491)
(3,285)
0
(732)
(46)
(212)
(16,468)
89
(32,997)
5,033
(180)
11
(14)
0
(152)
(5,502)
0
(2,471)
0
1
(11,483)
0
(14,757)
0
0
0
0
0
0
(7,410)
0
0
0
0
0
0
(7,410)
0
0
0
0
0
0
(9,415)
0
0
0
0
0
0
(9,415)
421
(64)
0
0
0
0
0
0
0
0
0
(433)
4,287
(3,361)
18,240
0
19,090
62,531
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
62,531
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
618
(2)
0
0
0
0
(419)
0
0
(9)
166
0
827
(706)
0
0
475
16,792
(40,111)
0
10,542
(103)
0
0
(15,134)
(335)
0
11
2,098
2,439
(2,584)
24,979
0
(1,406)
1,638
(157)
442
0
(208)
(5,131)
0
0
(9)
0
0
7,166
681
(423)
30,153
(24,788)
9,364
62,952
(64)
0
0
0
0
0
0
0
0
0
(433)
4,287
(3,361)
18,240
0
81,621
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
F3Q13A
12/12A
F2Q13A
9/12A
F1Q15A
6/14A
12,438
(4,038)
0
(207)
(6,251)
43
423
234
1,073
0
0
(5)
90
473
89
1,777
(286)
(1,572)
228
(15)
271
1,906
1,121
124
10,177
(FYE March 31; RMB in millions, except share and per share amounts)
Net Income
Adjustments to Net Income
Ga i n on di s pos a l s of equi ty i nves tees
Rea l i zed a nd unrea l i zed l os s rel a ted to i nves tment s ecuri ti es
Cha nge i n fa i r va l ue of other a s s ets a nd l i a bi l i ti es
Los s on di s pos a l s of other s ubs i di a ri es
Depreci a ti on a nd a morti za ti on
Amorti za ti on of i nta ngi bl e a s s ets
Sha re-ba s ed compens a ti on
Equi ty-s ettl ed dona ti on expens e
Impa i rment of goodwi l l a nd i nta ngi bl e a s s ets
Los s on di s pos a l s of property a nd equi pment
Sha re of res ul ts of equi ty i nves tees
Deferred i ncome ta xes
Al l owa nce for doubtful a ccounts rel a ti ng to mi cro l oa ns
Changes in assets and liabilities, net of effects of acquisitions and disposals
Res tri cted ca s h a nd es crow recei va bl es
Loa n recei va bl es
Prepa yments , recei va bl es a nd other a s s ets
Income ta x pa ya bl e
Es crow money pa ya bl e
Accrued expens es , a ccounts pa ya bl e a nd other l i a bi l i ti es
Mercha nt depos i ts
Deferred revenue a nd cus tomer a dva nces
Net Cash From Operations
F1Q13A
6/12A
10
(54)
(76)
(97)
10
18,867
33,045
51,912
68,384
51,912
120,296
35,564
120,296
155,860
5,582
155,860
161,442
16,552
161,442
177,994
11,357
177,994
189,351
29,088
189,351
218,439
7,521
218,439
225,961
9,571
7,286
16,857
13,539
16,857
30,396
2,649
30,396
33,045
128,397
33,045
161,442
64,470
161,442
225,912
68,729
225,912
294,640
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Meaning
Expected rate of return on investment at current prices levels is above that rate required,
in CRT's view, to undertake the attendant risks perceived- positive risk/reward investment
balance.
Expected rate of return on investment at current prices levels is in line with that rate
required, in CRT's view, to undertake the attendant risks perceived- equitable/reward
investment balance.
Expected rate of return on investment at current prices levels is below that rate required,
in CRT's view, to undertake the attendant risks perceived- negative risk/reward investment
balance.
Fair Value
Sell
Ratings Percentages
As of September 17, 2014
Buy 61.65%
Fair Value 36.84%
Sell 1.50%
Valuations are based on estimates using traditional industry methods including, inter alia, analysis of earnings multiples, discounted cash flow calculations
and net asset value assessments. Price targets should be considered in the context of all prior CRT research published in connection with the subject
issuer, which may or may not have included price targets, as well as developments relating to the company, its industry and financial markets. Risks that
may impede achievement of the stated price target, if any, include, but are not limited to, broad market and macroeconomic fluctuations and unforeseen
changes in the subject companys fundamentals or business trends.
OTHER DISCLOSURES
This report has no regard to the specific investment objectives, financial situation or particular needs of any specific recipient. This report is published
solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The
securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. This report is based on information obtained
from sources believed to be reliable but is neither guaranteed to be accurate nor intended to be a complete statement or summary of the securities,
markets or developments referred to in the report. Recipients should not use this report as a substitute for the prudent exercise of their own judgment.
Any opinions expressed in this report are subject to change without notice and CRT is under no obligation to update or keep current the information
contained herein. CRT and/or its directors, officers and employees may have or may have had interests or long or short positions in, and may at any time
make purchases and/or sales as principal or agent, or may have acted or may act in the future as market maker in the relevant securities or related financial
instruments discussed in this report. CRT may rely on informational barriers such as Chinese Walls to control the flow of information situated in one or
more areas within CRT into other units, divisions or groups within CRT.
Past performance is not necessarily indicative of future results. Options, derivative products and futures are not suitable for all investors due to the high
degree of risk associated with trading these instruments. Foreign currency rates of exchange may adversely effect the value, price or income of any security
or related instrument described in this report.
CRT accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this report. CRT specifically prohibits the
re-distribution of this report by third parties, via the internet or otherwise, and accepts no liability whatsoever for the actions of such third parties in this
respect. Additional information is available upon request. Clients who wish to effect transactions should contact their sales representative.
2014 CRT Capital Group LLC. All rights Reserved. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of all
or any portion of this issue except with permission of the publisher. 262 Harbor Drive, Stamford, CT 06902
Page 50
Analyst
Phone
(203) 569-4345
ssingh@crtllc.com
(203) 569-4351
(203) 569-4355
(203) 569-4354
(203) 548-8245
(203) 548-8246
(203) 569-4328
(203) 569-4350
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jchan@crtllc.com
tchiang@crtllc.com
mderchin@crtllc.com
ndoshi@crtllc.com
rcoolbrith@crtllc.com
depstein@crtllc.com
lgiordano@crtllc.com
mgunther@crtllc.com
(203) 569-4368
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mkim@crtllc.com
kludtke@crtllc.com
(203) 569-4381
spetralia@crtllc.com
(203) 569-4373
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atiwana@crtllc.com
lvitanza@crtllc.com
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(203) 569-4336
(203) 569-4375
jvonriesemann@crtllc.com
kprior@crtllc.com
(203) 569-4325
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Coverage Universe
Medical Technology
Generalist, Distressed, High-Yield, Special Situations
Specialty/Generic Pharmaceuticals
Airlines, Aerospace, Transportation
Internet & Interactive Media
Convertible Specialist
Consumer/Staples & Consumer Discretionary/Retail
REITs, Homebuilders, Building Products
Autos, Industrials, Specialty Finance
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