Dongfang Securities: Maintains Alibaba-W "Buy" rating with a target price of HKD 204.79

According to the Zhitong Finance APP, Dongfang Securities released a research report stating that under the accelerated pace of AI-driven cloud services from Alibaba-W (09988) and the expansion of cloud services overseas, the company continues to see month-on-month acceleration. The main site benefits from the synergy effects of food delivery and continues to maintain steady growth under the meta logic interpretation. The investment in flash sales has increased this quarter but has entered a phase of reduced losses. The empowerment of AI in various business segments of the company continues to deepen, and the growth potential driven by AI is optimistic, with a target price of HKD 204.79, maintaining a "buy" rating.

In terms of e-commerce, the firm expects the e-commerce business to achieve revenue of CNY 127.18 billion in FY26Q2 (yoy +9.0%). Benefiting from the growth in main site users and retention time driven by the Taobao flash sales business, the firm expects Taotian's GMV to grow by 7% year-on-year this quarter, approaching a stabilization of the online retail market share, continuing the steady trend from the previous quarter. CMR is expected to grow by 10% year-on-year, with flash sales contributing 2-3% growth, partly due to the increased penetration of intelligent advertising products across the site and upgrades to advertising recommendation algorithms driving improvements in advertising TR. Although CMR may face slight pressure after the commission base stabilizes next quarter, the synergy effects from flash sales combined with the penetration of AI advertising products across the site are expected to maintain high single-digit growth in CMR. In August, Taotian officially launched the AI universal search shopping assistant, further enriching the advertising space of Taotian and is expected to enhance the order conversion rate through AI personalized recommendations. The firm is optimistic about Taotian's meta logic interpretation under the upgrade of AI components (AI-driven user retention & conversion rate improvement driving advertising TR growth), indicating that there is still significant room for improvement in the main site's advertising TR in the future.

In terms of instant retail, the firm estimates that the company's instant retail business will incur losses exceeding CNY 35 billion in FY26Q2, with an average loss of around CNY 5 per order. During the Q3 summer peak season, the company has increased its order fulfillment efforts, stabilizing daily orders at 80 million in August, with peak daily orders exceeding 100 million. However, starting in September, the company has reduced food delivery subsidies, and it is expected that the loss per order will shrink to CNY 2-3 in FY26Q3. The company is currently still focused on market share as its core goal, concentrating on long-term healthy growth, and will reasonably adjust subsidy levels and the structure of flash sales while maintaining order volume and market share. With improvements in fulfillment capabilities and enhanced economies of scale, overall losses are controllable, and in the medium to long term, further narrowing of losses is expected with improvements in flash sales UE