5% YoY topline in 2QFY26 was mainly contributed by solid +10% YoYcore China eC CMR and +34% YoY accelerated cloud. +60% YoY quickcommerce (QC) revenue demonstrated promising initial results withwell-progressed UE improvement and GMV share gain in recent month.We see Co. is dedicated to accomplish its L-T consumption and AIvisions and near term refined QC prioritisations shifts towards crosssell accelerations and UE improvement on top of better GMV share withinvestments closely related to dynamic competitions. We stillappreciate monetisation gains of core eC CMR and cloud momentum,maintain BUY and TP of US$187.0/ HK$182.0.
Key Factors for Rating
Acceleration of committed executions but smarter moves. We see Co. isyielding promising initial results on achieving its determined long-termconsumption and AI visions. We expect Co. to prioritise i) investing firmly in QCand AI capabilities (both 2B and 2C); ii) accelerating cross-sell initiativesbetween QC and conventional eC; iii) dynamically tweaking QC operationalstrategies on competitions with UE improvement on top of better GMV shareprioritisation; iv) investing rationally in other new initiatives; and v) improvingmonetisation and cost efficiency. Thus, we slightly nudge down our FY2027-28Etotal revenue forecasts by 1-2% to reflect decreased CMR and AIDC which werepartially offset by increased QC and Cloud estimates. We largely keep our bottomline estimates unchanged but slightly cut our China core eC earnings forecastsby 1-2% to reflect lower revenue projections.
2QFY26 solid core CMR and cloud; well-progressed QC. Total revenuegrew 5% YoY to RMB247.8bn (Accelerated +15% YoY considering Sunart andIntime deconsolidation). Core China eC CMR continuously delivered 10% YoYdriven by increased take rate on additional software fees and Quanzhantuipenetration. Quick commerce revenue increased +60% YoY. Cloud revenuegrew robustly at accelerated 34% YoY with external cloud revenue logging 29%YoY and AI related product continuing delivering triple digit YoY for nineconsecutive quarters. Adj. EBITA decreased by 78% YoY to RMB9.1bn mainlydue to quick commerce investments (excluding QC investments, traditional eCadj. EBITA grew at ~5% YoY), partially offset by significantly improved AIDC0.5% adj. EBITA (vs. -9.2% in 2QFY25). RMB10.5bn adj. net profit attributablemissed streets’ expectation by 23%. Capex was RMB31.5bn. Co. repurchasedUS$253m shares and by end Sep 2025, it has US$19b buyback quotaoutstanding till Mar 2027.
Key Risks for Rating
Downside: i) intensified competition; ii) weak macro and online consumptionsentiments; iii) underperformed synergies brought by quick commerce; iv) AIand cloud growth deterioration; and v) dampened partnerships.
Valuation
Maintain BUY and our SOTP TP unchanged at US$187.0/ HK$182.0 derived fromi) US$112.0 on 15.0x FY2026E total core commerce adj. EBITA; ii) US$61.0 on5.0x FY2027E cloud revenue; iii) US$8.0 on 0.5x FY2026E other innovativebusiness revenue; and iv) US$6.0 on share of listed and private investments.