Guojin Securities released a research report stating that BABA-W (09988) maintains a strong foothold in traditional e-commerce and is poised for stable market share growth. The cloud business, driven by AI, holds significant future potential. The firm projects adjusted net profits attributable to shareholders of RMB107.9 billion, RMB149.4 billion, and RMB175.8 billion for FY2026-2028, respectively, with corresponding adjusted P/E ratios of 24.8x, 17.9x, and 15.2x.

Valuation-wise, the e-commerce segment (excluding instant retail) is assigned an 11x EBITA multiple, while the cloud business is valued at 7x P/S. Other businesses are excluded from valuation for now. The target market cap stands at RMB3.36 trillion, translating to a target price of HK$192.48. This marks the initiation of coverage with a "Buy" rating.

Key highlights from Guojin Securities' analysis include:

**Company Overview** BABA-W is a global leader in e-commerce and internet technology. In June, the company restructured its organization, integrating Ele.me and Fliggy into its e-commerce division. By August, operations were streamlined into four core segments: China Commerce, International Digital Commerce, Cloud Intelligence, and Others. This refocus on "e-commerce and cloud+AI" has enhanced operational cohesion and revitalized competitive momentum.

**Instant Retail Bolsters E-Commerce Traffic** Since May, BABA-W has entered the instant retail space via food delivery. Key metrics include: 1) **User Engagement**: According to QuestMobile, daily active users (DAU) rebounded, with Taobao posting YoY growth of +3% to +19% from May to October. 2) **Order Volume**: July saw peak orders hit 120 million. Per Hongcan Data, Taobao Quick Purchase and Ele.me collectively raised their market share in mainstream food delivery platforms from 29.4% in Q4 2024 to 42.8% in Q3 2025 (order volume basis). 3) **Fulfillment Capacity**: Rider numbers surged over 240% between April and August 2025. 4) **Unit Economics (UE)**: FY26Q2 marked peak investment, with current UE losses halved from their high. Further scale and efficiency gains are expected to drive UE improvements.

The report notes that BABA-W's e-commerce cash flow supports instant retail investments, while the latter enhances user engagement and defends traffic dominance.

**Full-Stack AI Strategy** Alibaba Cloud ranks among the world's top four cloud providers, distinguished by its in-house AI chips, scalable cloud platforms, and foundational large-model capabilities. It operates 29 public cloud regions and 92 availability zones globally, with over 3,200 edge nodes. Annual capital expenditures exceed RMB100 billion.

The Qwen series of large models has evolved to Qwen3-Max, delivering significant performance upgrades. Integration with apps like Qwen APP, Quark, Taobao, and DingTalk forms a closed-loop ecosystem. In chips, T-Head's latest PPU leads domestically in technical specs.

**Risk Factors**: 1) Weaker-than-expected consumer demand; 2) Intensified e-commerce competition; 3) Regulatory and policy risks; 4) Technological development setbacks; 5) Overseas expansion challenges.