GTJ

A R

esea

rch

国泰

君安研

究

Alib

aba

Gro

up 阿

里巴巴

集团（

BA

BA

US）

C

ompa

ny R

epor

t

Company Report: Alibaba Group (BABA US) Ray Zhao 赵睿

公司报告：阿里巴巴集团 (BABA US) +86 755 23976755 zhaorui@gtjas.com

18 August 2016

Aliyun Rising Fast, Raise TP to USD120, Reiterate "BUY" 阿里云快速增长，提高目标价到120美元，重申“买入”

Alibaba Group delivered higher-than-expected 1QFY17 results. Alibaba Group’s 1QFY17 revenue was RMB32,106 mn, up 58.6% yoy, with non GAAP net profit of RMB12,187 mn, up 28.3% yoy, 13% above market consensus. GMV reached RMB837 bn, up 24.4% yoy, with Taobao GMV reaching RMB508 bn, up 19.0% yoy, and Tmall GMV was RMB329 bn, up 33.7% yoy. Alibaba Group's FY17 revenue growth guidance reached 48%.

Key points: 1) Aliyun’s revenue was above market expectation. In 1QFY17 Aliyun’s revenue reached RMB1,243 mn, up 156.3% yoy. We expect Aliyun's revenue in FY17-FY19 to reach RMB7,390 mn, RMB16,257 mn, and RMB32,514 mn, up 144.8%, 120.0%, and 100.0% yoy, respectively. Aliyun has started Ali-Launch plan to introduce the top 50 global software service providers into China. 2) Taobao and Tmall have added social elements to improve promotion conversion ratio. Taobao and Tmall apps changed a lot in 2Q16 by introducing lots of social elements, including live video promotion, which increased traffic and conversion rate.

Raise TP to USD120.00 and maintain ‘Buy’ investment rating. Alibaba Group's Ant Financial, Aliyun, and Lazada might begin to contribute more to valuation. We think Tmall Duel 11 holiday promotion might reach RMB125 bn, a catalyst to stock price. Our FY17-FY19 Non GAAP net profit estimates are RMB53.9 bn, RMB67.1 bn and RMB83.3 bn. Our TP of USD120.00 represents 30.7x FY18 Non GAAP PE.

阿里巴巴集团 2017 财年第一季度业绩好于预期。公司 2017 财年第一季度的收入达到人

民币 32,106 百万元，同比增长 58.6%，非 GAAP 净利润达到人民币 12,187 百万元，同

比上升 28.3%，高于市场预期 13%。GMV 达到人民币 8,370 亿元，同比增长 24.4%，

其中淘宝 GMV 达到人民币 5,080 亿元，同比增长 19.0%，而天猫 GMV 达到人民币 3,290亿元，同比增长 33.7%。2017 财年收入增长指引达到 48%。

要点：1）阿里云收入超预期。阿里云 2017 财年第一季度收入达到人民币 1,243 百万元，

同比增长 156.3%。我们预期阿里云将在 2017-2019 财年贡献人民币 7,390 百万元、人民

币 16,257 百万元、人民币 32,514 百万元的收入，同比上涨 144.8%、120.0%和 100%。

阿里云启动了 Ali-Launch 计划，在年底将引入全球顶尖的 50 家软件服务商。2）淘宝天

猫引入大量社交元素提高促销转化率。淘宝天猫 app 在 2016 年 2 季度发生很大变化，

大量引入社交元素，包括直播促销，增加了流量和转化率。 提高目标价到 120.00 美元, 维持投资评级为“买入”。阿里巴巴的蚂蚁金服、阿里云和

Lazada 将陆续进入估值。我们认为天猫双十一交易量会达到人民币 1,250 亿元，成为股

价的催化剂。 我们2017-2019财年非 GAAP 净利润预测是人民币539亿元、人民币 671亿元和人民币 833 亿元。目标价 120.00 美元，相当于 30.7 倍的 2018 财年非 GAAP 市

盈率。

Rating: Buy Maintained 评级： 买入 (维持)

6-18m TP 目标价: US$120.00 Revised from 原目标价: US$100.00 ADS Price ADS价格： US$97.000

Stock performance 股价表现

Change in ADS Price ADS 变动

1 M 1 个月

3 M 3 个月

1 Y 1 年

Abs. % 绝对变动 % 17.36 22.74 31.29

Rel. % to NASDAQ index 相对纳指变动 % 16.65 16.17 27.23

Avg. ADS price(US$) 平均 ADS 价（美元） 86.68 81.45 75.63

Source: Bloomberg, Guotai Junan Internat ional .

Mar End 年结

Turnover 收入

Net Profit 股东净利

Earnings /ADS 每 ADS 净利

Earnings /ADS 每 ADS 净利变动

PER 市盈率

BV/ADS 每 ADS 净资产

PBR 市净率

DP/ADS 每股股息

Yield 股息率

ROE 净资产收益率

3/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%) 2015A 76,204 24,149 10.330 (2.6) 58.2 67.357 8.9 0.000 0.0 25.7 2016A 101,143 71,460 29.070 181.4 20.7 101.521 5.9 0.000 0.0 35.1 2017F 149,503 34,552 13.648 (53.1) 46.8 110.928 5.4 0.000 0.0 13.0 2018F 190,629 42,707 18.103 32.6 35.3 124.164 5.1 0.000 0.0 14.1 2019F 248,664 52,406 22.474 24.1 28.4 140.165 4.6 0.000 0.0 15.0

Shares in issue (m) 总股数 (m) 2,473.0 Major shareholder 大股东 SoftBank 31.9% Market cap. (US$ m) 市值 (US$ m) 237,262.0 Free float (%) 自由流通比率 (%) 17.5 3 month average vol. 3 个月平均成交股数 (‘000) 17,362.5 FY17 Net gearing FY17 净负债/股东资金 (%) Net cash 52 Weeks high/low (US$) 52 周高/低 98.860 / 57.200 FY16-18 PEG FY16-18 市盈率相对盈利增长比率 2.4

Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 1 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Alibaba Group delivered higher-than-expected 1QFY17 results. Alibaba Group’s 1QFY17 revenue was RMB32,106 mn, up 58.6% yoy, with non GAAP net profit of RMB12,187 mn, up 28.3% yoy, 13% above market consensus. GMV reached RMB837 bn, up 24.4% yoy, with Taobao GMV of RMB508bn, up 19.0% yoy, and Tmall GMV of RMB329bn, up 33.7% yoy. Alibaba Group's FY17 revenue growth guidance reached 48%. Mobile GMV reached RMB626bn, up 58.7% yoy, and PC GMV reached RMB211bn, down 30.1% yoy. Mobile GMV accounted for 75.0% of total GMV. Retail ecommerce revenue reached RMB23,838 mn, up 48.8% yoy, with mobile revenue of RMB17,514 mn, up 118.6% yoy, accounting for 74.9% of total revenue. Total monetization ratio reached 2.79%, with PC ecommerce monetization ratio of 2.62% and mobile ecommerce monetization ratio of 2.80%. Aliyun has revenue of RMB1,243mn, up 156.3% yoy. In general, Alibaba Group’s results are above expectations: 1) Aliyun growth was above market expectation. We expect Aliyun might contribute RMB7.5bn in FY17, up 150.0% yoy, respectively, representing 5.6% of total revenue. Aliyun's adjusted EBITDA only reached RMB-158mn, which means Aliyun might break even in FY18. Aliyun might begin to boost Alibaba Group's valuation slightly. 2) Tmall growth maintained. Tmall GMV growth as only slightly slower than JD's 40.1% GMV growth in 2Q16. 3) Cutting stock-based compensation. The stock-based compensation ratio only reached 11.5%, down 7.3ppt qoq, which means Alibaba's operating margin could improve. Operating margin reached 27.4%, up 1.9ppt yoy. Table 1: Alibaba Group GMV Estimates GMV Estimates FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E GMV mn RMB 663 1,077 1,678 2,444 3,092 3,821 4,627 5,451 growth yoy % 62.5% 55.7% 45.7% 26.5% 23.6% 21.1% 17.8% Taobao Market Place mn RMB 550 824 1,173 1,597 1,873 2,230 2,693 3,254 growth yoy % 49.8% 42.4% 36.1% 17.3% 19.1% 20.7% 20.8% Tmall mn RMB 89 253 505 847 1,219 1,591 1,934 2,196 growth yoy % 184.5% 99.4% 67.7% 43.9% 30.5% 21.6% 13.6% PC GMV mn RMB 647 998 1,359 1,449 1,088 783 513 308 growth yoy % 54.3% 36.2% 6.6% -24.9% -28.0% -34.6% -39.9% Mobile GMV mn RMB 16 79 319 994 2004 3038 4114 5142 growth yoy % 386.9% 300.9% 212.2% 101.5% 51.6% 35.4% 25.0% Mobile GMV as a percentage of total GMV % 2.5% 7.4% 19.0% 40.7% 64.8% 79.5% 88.9% 94.3% Source: the Company, Guotai Junan International. Table 2: Alibaba Group GMV and Monetization Ratio Assumptions mn RMB FY13 FY14 FY15 FY16 FY17E FY18E FY19E China Retail Revenue 26,970 42,832 59,732 80,033 108,250 132,728 166,258 PC revenue 26,581 39,927 41,892 29,669 20,383 12,544 6,999 Mobile revenue 389 2,905 17,840 50,364 87,534 120,184 159,259 Proportion % PC revenue 98.6% 93.2% 70.1% 37.1% 18.8% 9.5% 4.2% Mobile revenue 1.4% 6.8% 29.9% 62.9% 80.9% 90.5% 95.8% growth yoy 58.8% 39.5% 34.0% 35.3% 22.6% 25.3% PC revenue 50.2% 4.9% -29.2% -31.3% -38.5% -44.2% Mobile revenue 646.8% 514.1% 182.3% 73.8% 37.3% 32.5% Monetization rate 2.5% 2.6% 2.4% 2.6% 2.8% 2.9% 3.1% PC monetization rate on PC retail e-commerce GMV 2.7% 2.9% 2.9% 2.7% 2.6% 2.4% 2.3% Mobile monetization rate on mobile retail e-commerce GMV 0.5% 0.9% 1.8% 2.5% 2.9% 2.9% 3.1% Revenue breakdown by type Online marketing services 19,697 29,729 37,603 53,366 74,144 87,911 109,262 Commission 6,161 12,023 21,264 25,794 33,224 43,926 56,097 Storefront fees and others 1,112 1,080 865 874 882 891 900 Proportion % Online marketing services 73.0% 69.4% 63.0% 66.7% 68.5% 66.2% 65.7% Commission 22.8% 28.1% 35.6% 32.2% 30.7% 33.1% 33.7% Storefront fees and others 4.1% 2.5% 1.4% 1.1% 0.8% 0.7% 0.5% growth yoy Online marketing services 100.9% 50.9% 26.5% 41.9% 41.5% 18.6% 24.3% Commission 111.4% 95.1% 76.9% 21.3% 28.6% 32.2% 27.7% Storefront fees and others 58.2% -2.9% -19.9% 1.0% -51.2% 1.0% 1.0% Ad monetization rate on total retail GMV 1.83% 1.77% 1.54% 1.73% 1.94% 1.90% 2.00% Commission monetization rate on total retail GMV 0.57% 0.72% 0.87% 0.83% 0.87% 0.95% 1.03% Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 2 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Table 3: Alibaba Group 1QFY17 (2Q16) Results 4QFY15 1QFY15 2QFY16 3QFY16 4QFY16 1QFY17 YoY QoQ 1Q15 2Q14 3Q15 4Q15 1Q16 2Q16 Income Statement Revenue mn RMB 17,425 20,245 22,171 34,543 24,184 32,154 58.8% 33.0% Cost of Revenue mn RMB (6,133) (6,711) (7,131) (10,951) (9,562) (11,744) 75.0% 22.8% Gross Profit mn RMB 11,292 13,534 15,040 23,592 14,622 20,410 50.8% 39.6% Sales and Marketing Expenses mn RMB (3,042) (2,241) (3,225) (3,641) (3,573) (3,988) 78.0% 11.6% General and Administrative Expenses mn RMB (2,531) (2,244) (2,564) (2,500) (2,861) (3,614) 61.1% 26.3% Product Development Expenses mn RMB (2,477) (3,241) (2,128) (3,749) (2,333) (2,743) -15.4% 17.6% Yahoo Tipla Amendment Payment mn RMB Amortization of Intangible Assets mn RMB (643) (647) (728) (1,268) (743) (1,251) 93.4% 68.4% Operating Profit mn RMB 2,599 5,161 6,395 12,434 5,112 8,814 70.8% 72.4% Interest Expense mn RMB (475) (477) (484) (475) (510) (626) 31.2% 22.7% Interest and Investment Income/(Loss), Net mn RMB 1,846 27,382 18,150 2,944 3,778 750 -97.3% -80.1% Other Income, Net mn RMB 496 551 429 1,607 (529) 1,763 220.0% -433.3% Impairment of Goodwill, intangible Assets mn RMB 0 0 0 0 0 0 Provision for Income Tax mn RMB (1,203) (1,394) (1,671) (3,559) (1,825) (2,091) 50.0% 14.6% Share of Results of Equity Investees mn RMB (394) (407) (116) (495) (712) (1,468) 260.7% 106.2% Minority Interest (After Tax) mn RMB 24 27 51 42 51 408 1411.1% 700.0% Net Income (Loss) mn RMB 2,893 30,843 22,754 12,498 5,365 7,550 -75.5% 40.7% Dividends on Preferred Stock mn RMB 0 0 0 0 0 0 Preferred Stock Adjustments mn RMB 0 0 0 0 0 0 Net Income Available to Common Shareholders mn RMB 2,893 30,843 22,754 12,498 5,365 7,550 -75.5% 40.7% China Retail GMV bn RMB 600 673 713 964 742 837 24.4% 12.8% Desktop bn RMB 296 302 273 313 200 211 -30.1% 5.3% Mobile bn RMB 304 371 440 651 542 626 68.7% 15.6% Taobao marketplace bn RMB 381 427 438 559 449 508 19.0% 13.1% Tmall bn RMB 219 246 275 405 293 329 33.7% 12.3% Retail e-commerce Revenue mn RMB 13,049 15,712 17,267 28,714 18,340 23,383 48.8% 27.5% Desktop mn RMB 7,802 7,698 6,747 9,968 5,256 5,536 -28.1% 5.3% Mobile mn RMB 5,247 8,014 10,520 18,746 13,084 17,514 118.6% 33.9% Monetization Rate of retail GMV % 2.17% 2.33% 2.42% 2.98% 2.47% 2.79% 0.5 0.3 Desktop Monetization Rate on Desktop Retail GMV % 2.64% 2.55% 2.47% 3.18% 2.62% 2.62% 0.1 0.0 Mobile Monetization on Desktop Retail GMV % 1.73% 2.16% 2.39% 2.88% 2.42% 2.80% 0.6 0.4 Revenue China Commerce mn RMB 13,895 16,709 18,313 29,876 19,423 24,644 47.5% 26.9% Retail mn RMB 13,049 15,712 17,267 28,714 18,340 23,383 48.8% 27.5% Wholesale mn RMB 846 997 1,046 1,162 1,083 1,261 26.5% 16.4% International Commerce mn RMB 1,637 1,746 1,836 2,062 1,985 2,549 46.0% 28.4% Retail mn RMB 437 501 481 632 590 1,117 123.0% 89.3% Wholesale mn RMB 1,200 1,245 1,355 1,430 1,395 1,432 15.0% 2.7% Cloud Computing and Internet Infrastructure mn RMB 388 485 649 819 1,066 1,243 156.3% 16.6% Others mn RMB 1,505 1,305 1,373 1,786 1,710 3,670 181.2% 114.6% Total mn RMB 17,425 20,245 22,171 34,543 24,184 32,106 58.6% 32.8% Non GAAP Non GAAP EBITDA mn RMB 8,583 10,585 11,146 19,111 11,498 14,963 41.4% 30.1% Non GAAP net profit mn RMB 7,741 9,496 9,252 16,358 7,635 12,187 28.3% 59.6% Growth% Non GAAP operating profit % 24.6% 23.5% 31.2% 26.5% 34.0% 41.4% 17.9 7.4 Non GAAP net profit % 16.0% 29.8% 35.9% 24.7% -1.4% 28.3% (1.4) 29.7 Expenses Ratio % Sales and Marketing Expenses % 17.5% 11.1% 14.5% 10.5% 14.8% 12.4% 1.3 (2.4) General and Administrative Expenses % 14.5% 11.1% 11.6% 7.2% 11.8% 11.2% 0.2 (0.6) Product Development Expenses % 14.2% 16.0% 9.6% 10.9% 9.6% 8.5% (7.5) (1.1) Amortization of Intangible Assets % 3.7% 3.2% 3.3% 3.7% 3.1% 3.9% 0.7 0.8 Source: the Companies, Guotai Junan International.

See the last page for disclaimer Page 3 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Figure 1: Annual Active Buyers Figure 2: Monthly Active Users

52.0%

44.6%

37.3%

31.5%

6.0%

0%

10%

20%

30%

40%

50%

60%

0

100

200

300

400

500

600

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15E

4Q15E

1Q16E

2Q16E

3Q16E

4Q16E

1Q17 E

2Q17E

3Q17E

4Q17E

1Q18E

mill

ion

Annual Active Users growth yoy of Annual Active Users

91

136163

188217 265

289.0 307.0

346.0

393.0 401.9 427.0 429.0

444.6 450.1 449.4 463.4

475.8 477.1 138.5%

94.9%

77.3%

63.3%59.4%

48.3%

39.0%

39.1% 24.0%

13.1%

12.0%

5.2%

8.0%

7.0%

6.0%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

100

200

300

400

500

600

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15E

4Q15E

1Q16E

2Q16E

3Q16E

4Q16E

mill

ion

Mobile Monthly Active Users growth yoy

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Taobao and Tmall have introduced more social elements in 2Q16. 1) Taobao's DAU/ MAU has improved in 2Q16. Taobao and Tmall have both added live channels. According to Joe Tsai, Taobao's DAU/ MAU ratio has improved to around 40% currently. According to Questmobile, this ratio in 1Q16 and 2Q16 only reached 29% and 35%. The improved DAU / MAU ratio means that Taobao buyers are becoming more active in 2Q16 and 3Q16, perhaps due to the new social elements in the App. 2) It might be great innovation to combine online promotions and live video talk shows. Last year, Taobao has opened Weitao (微淘) for fashion icons to demonstrate their life pictures. Under the new live channels, Taobao and Tmall's fashion icon sellers have combined live video with small scale of promotion, especially to their old customers. In some cosmetic channels, fashion icon sellers could teach their young customers how to make up and what kind of cosmetics to use directly. Some median and large online shops even created small self-produced variety shows to attract potential buyers. Large branded shops will invite their spokespersons directly into their online promotion activities to make some live talk shows to his or her fans. The new innovation might increase buyers' participation in the promotion. Buyers and the sellers have far more communication in the new promotion than ever. As a result, both user time spent and conversion ratio were improved. Figure 3:Taobao Live Figure 4: Tmall Live

Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Favorable seasonality catalyst is coming. According to data published by the National Bureau of Statistics of China, China e-commerce GMV in 7M16 reached RMB390 bn, up 23.6% yoy and down 6.7ppt qoq. China commodity e-commerce GMV reached RMB310 bn, up 23.2% yoy. China service e-commerce GMV reached RMB81 bn, up 25.1% yoy. In 2Q16, China e-commerce GMV reached RMB1,212 bn, up 28.6% yoy, in which China commodity e-commerce GMV reached RMB990 bn, up 27.3% yoy. China service e-commerce GMV reached RMB221 bn, up 35.0% yoy. Alibaba Group's GMV in 1QFY17 (2Q16) reached RMB837 bn, up 24.4% yoy, with Taobao GMV at RMB508 bn, up 19.0% yoy and 41.9% of total market share. Tmall GMV was RMB329bn, up 33.7% yoy, flat qoq and 27.2% of total market share. JD GMV in 2Q16 reached RMB160.4 bn, up 40.1% yoy and 13.2% of total market share. 3Q was the off-season for China e-commerce and seasonality effects might become stronger from Jul. to Nov. China e-commerce players have strengthened their holiday promotion in Jun. and Nov., as See the last page for disclaimer Page 4 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

a result, China consumers will spend more and more in online e-commerce in Jun. and Nov. In 1Q and 3Q, consumers might cut their online spending in the off-season due to budget constraints. In 2015, 11M15 GMV growth reached its highest level of 33.0% in 2H15. Tmall Duel 11 Singles Day promotion will be a catalyst for Alibaba Group in 4Q16. We estimate that Tmall Duel 11 Singles Day promotion GMV might reach RMB125 bn-RMB130 bn, up 36.9%-43.4% yoy and 10.5%-11.0% of its 4Q16 GMV. Tmall has announced to hold a variety show in Duel 11 with Zhejiang TV stations, a top TV station in China. Alibaba Group tries to build Tmall Duel 11 variety show as a top variety show IP in China. Tmall's market share should improve in 2H16 due to strong promotion. Table 4: China E-commerce Market Monthly data (RMB bn)

China Retail Growth yoy

Commodity E-commerce GMV

Growth yoy

Service E-commerce GMV

Growth yoy

Commodity+Service E-commerce GMV

Growth yoy

Express Industry Revenue

Growth yoy

Package Delivered

Growth yoy

bn RMB % bn RMB % bn RMB % bn RMB % bn RMB % bn Units % 1-2M15 4,799 10.7% 399 47.4% 76 31.4% 475 44.6% 34.7 35.0% 2.3 43.4%

3M15 2,272 10.2% 232 31.2% 54 63.4% 286 36.2% 19.7 26.0% 1.4 39.0% 4M15 2,239 10.0% 238 38.5% 45 46.6% 283 39.7% 21.2 35.6% 1.5 43.7% 5M15 2,420 10.1% 246 32.5% 46 42.0% 292 33.9% 21.4 29.2% 1.6 44.2% 6M15 2,428 10.6% 261 39.0% 49 35.1% 310 38.4% 22.6 39.3% 1.6 45.7% 7M15 2,434 10.5% 238 28.4% 52 36.5% 290 29.8% 22.2 35.5% 1.6 47.4% 8M15 2,489 10.8% 251 27.2% 53 41.7% 304 29.5% 22.1 30.8% 1.7 48.2% 9M15 2,522 10.9% 286 29.1% 66 59.8% 351 33.9% 24.0 33.2% 1.9 55.6%

10M15 2,828 11.0% 294 21.8% 63 39.7% 357 24.6% 25.2 38.0% 1.9 50.4% 11M15 2,794 11.2% 442 33.0% 63 41.3% 504 34.0% 32.6 42.7% 2.6 58.3% 12M15 2,800 11.3% 356 21.2% 76 38.0% 431 23.9% 31.3 39.5% 2.4 47.6%

1-2M16 5,291 10.2% 505 25.4% 131 72.1% 636 27.2% 46.8 34.8% 3.4 50.3% 3M16 2,511 10.5% 319 26.5% 70 38.0% 389 28.6% 30.5 54.9% 2.4 66.2% 4M16 2,465 10.1% 318 25.0% 71 36.1% 389 26.9% 30.1 42.0% 2.4 56.7% 5M16 2,661 10.0% 321 27.0% 74 35.1% 395 28.4% 31.7 48.2% 2.5 57.2% 6M16 2,686 10.6% 351 29.6% 77 33.9% 428 30.4% 32.4 43.3% 2.6 56.6% 7M16 2,683 10.2% 310 23.2% 81 25.1% 390 23.6% 31.1 40.4% 2.5 52.2%

1Q15 7,072 10.6% 631 41.0% 130 43.0% 761 41.3% 54.4 31.6% 3.7 41.7% 2Q15 7,086 10.2% 745 36.6% 140 40.9% 885 37.3% 65.2 34.7% 4.8 44.6% 3Q15 7,445 10.6% 775 28.3% 170 46.4% 946 31.2% 68.3 33.1% 5.2 50.6% 4Q15 8,422 10.0% 1,091 25.9% 201 39.5% 1,292 27.8% 89.1 40.2% 7.0 52.2% 1Q16 7,802 10.3% 824 25.7% 201 35.8% 1,025 27.8% 77.3 42.1% 5.8 56.4% 2Q16 7,811 10.2% 990 27.3% 221 35.0% 1,212 28.6% 94.2 44.5% 7.5 56.8%

Source: National Bureau of Statistics of China, China Post Group Corporation, Guotai Junan International.

Table 5: Market Share of Alibaba Group and JD in China Retail E-Commerce

Tmall&Taobao Growth yoy Taobao Growth yoy Tmall Growth yoy JD Growth yoy JD Direct Sales Growth yoy JD POP Growth yoy GMV bn RMB % bn RMB % bn RMB % bn RMB % 1Q15 600 39.5% 381 29.2% 219 62.2% 87.8 99.0% 50.9 63.1% 36.9 186.0% 2Q15 673 34.3% 427 24.9% 245 54.7% 114.5 81.7% 64.7 65.1% 49.8 109.2%

3Q15 713 28.3% 438 15.3% 275 56.4% 115.0 70.9% 61.3 51.4% 53.7 100.4%

4Q15 964 30.3% 559 13.2% 405 55.0% 145.3 58.0% 78.7 62.6% 66.6 78.1% 1Q16 742 23.7% 449 17.8% 293 33.8% 129.3 47.3% 76.2 50.0% 53.1 63.0%

2Q16 837 24.4% 508 19.0% 329 33.7% 160.4 40.1% 83.1 40.8% 77.3 39.3% Market shares%

1Q15 78.9% 50.1% 28.8% 11.5% 6.7% 4.9% 2Q15 76.0% 48.2% 27.7% 12.9% 7.3% 5.6% 3Q15 75.4% 46.3% 29.1% 12.2% 6.5% 5.7% 4Q15 74.6% 43.3% 31.3% 11.2% 6.1% 5.2% 1Q16 72.4% 43.8% 28.6% 12.6% 7.4% 5.2% 2Q16 69.1% 41.9% 27.2% 13.2% 6.9% 6.4%

Source: National Bureau of Statistics of China, China Post Group Corporation, Guotai Junan International.

See the last page for disclaimer Page 5 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Aliyun Aliyun's cloud market might boom. Aliyun has launched 319 new products in 2Q16, including more industrial solutions, AI calculation services, more big data services. Alibaba Cloud and SoftBank have established a joint venture to launch computing services in Japan. SoftBank would have 51% shares in the JV. Furthermore, in Aug 9th 2016, in the Beijing Yun Qi Conference (阿里云栖大会), Alibaba has announced its Ali-Launch Plan: Invite top 50 software service providers to Aliyun by the end of year. In the conference, there were 11 top software service providers who has decided to cooperate with Aliyun, including SAP, SUSE, HERE, Hillstone, Check Point, AppScale, AppEx Networks, Haivision, Wowza, and TrueIDC. SAP is one of the top 3 CRM and ERP service providers in the world and could provide CRM & ERP solutions to nearly all industries, especially to manufacturing industry and consumption industry. We think Ali-Launch might be a new start to Aliyun: 1) Aliyun's IaaS service quality has been recognized by the top global software leaders. Aliyun's increasing credit might attract more domestic software service providers. 2) Aliyun has approved being a window for global software providers to enter into China. Aliyun has 0.577mn paid users. The big CRM & ERP companies like SAP could provide industry solutions to almost all the industries, largely expanding Aliyun's potential enterprise customer bases. 3) Aliyun is creating its cloud software supermarket. According to Gartner's estimates in 1M16, the global cloud ad market will reach USD90.3bn, up 13.6% yoy, much larger than IaaS market. However, currently the cloud ad market was very small in China, perhaps due to lack of SaaS providers. We think more SaaS providers might form a cloud software markets and Aliyun might begin to explore the cloud ad markets by distributing SaaS services. Table 6: Global Cloud Service Market Growth Prediction by Gartner

Gartner 1M16 (bn USD) 2015 Growth (%) 2016 Growth (%) Cloud business process services (BPaaS) 39.2 2.7 42.6 8.7 Cloud application services (SaaS) 31.4 15.5 37.7 20.3 Cloud application infrastructure services (PaaS) 3.8 16.1 4.6 21.1 Cloud system infrastructure services (IaaS) 16.2 31.9 22.4 38.4 Cloud management and security services 5.0 20.7 6.2 24.7 Cloud advertising 79.4 15.4 90.3 13.6 Total market 175.0 13.7 203.9 16.5

Source: Gartner 1M16. Figure 5: Aliyun Ecosystem

Source: Guotai Junan International.

See the last page for disclaimer Page 6 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Aliyun's VP Hu Xiaoming (胡晓明) has set up 3 new major targets: visual innovation, life science, and data start-up. In 2016, more and more top apps began to add social, video-on-demand, and live video elements into their apps, such as Toutiao.com, Weibo, Taobao and Tmall. The management from Aliyun has confirmed the trend and the next elements might be VR/AR technologies. The new trend might largely increase the demand of CDN services, one of the most profitable business under Aliyun. Secondly, cloud computing has largely reduced the cost of gene sequencing, to around USD5,000 per person. Aliyun is working closely with Genomics (华大基因), the top life science enterprise in China. In the future, related lift science services might boom. Thirdly, as users' behavior data and IT industry data have become more abundant, the big data analysis service, or business intelligent service might also boom. Moreover, Aliyun might add more AI technology in big data analysis, to improve business conversion ratio, improve CRM, and so, on. Aliyun has great revenue growth potential in the next decade. 1) Aliyun’s revenue was above market expectation in 1QFY17. In 1QFY17 Aliyun’s revenue reached RMB1,243 mn, up 156.3% yoy. We expect Aliyun's revenue in FY17-FY19 to reach RMB7,390 mn, RMB16,257 mn, and RMB32,514 mn, up 144.8%, 120.0%, and 100.0% yoy, respectively, representing 4.9%, 8.5%, and 13.1% of total revenue, respectively. 2) Aliyun might gain market share in China IT spending. According to Gartner, China IT expenditure reached around RMB2.2 trillion in 2015, up 4.1% yoy, and is expected to reach RMB2.3 trillion in 2016, up 3.7% yoy. 3) Aliyun's adjusted EBITDA loss reached RMB158 mn, down 57.6% yoy. Paid users reached 0.577 mn, up 119% yoy and 12.4% qoq. Joe Tsai estimated that Aliyun's adjusted EBITDA might breakeven when paid users reached 1.0mn. Currently, Aliyun's revenue might be only 10% of AWS. And it might take 2~3 years for Aliyun to make profits. In 2Q16, AWS's revenue reached a record high of USD2,886mn, up 28.6% yoy, with non GAAP operating margin of around 30%. AWS's strong performance would boost Aliyun's profitability outlook. Figure 6: Bullish Projection of Aliyun' s Revenue from 2015 to 2025E

819 1,966

8,649

24,908

143,530

127.7%

174.7%

140.0%

100.0%

80.0%

60.0%

50.0%

40.0%

30.0%25.0%

20.0%22.7%

48.4%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

200.0%

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2Q153Q154Q151Q162Q163Q16E4Q16E1Q17E2Q17E3Q17E4Q17E1Q18E2Q18E3Q18E4Q18E1Q19E2Q19E3Q19E4Q19E1Q20E2Q20E3Q20E4Q20E1Q21E2Q21E3Q21E4Q21E1Q22E2Q22E3Q22E4Q22E1Q23E2Q23E3Q23E4Q23E1Q24E2Q24E3Q24E4Q24E1Q25E2Q25E3Q25E4Q25E

百万

人民

币

Aliyun Growth YoY As % of total Revenue

Source: the Company, Guotai Junan International. Table 7: Amazon Revenue Breakdown and AWS Amazon (mn USD) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 North America

Net sales 10,808 10,994 11,699 17,333 13,406 13,796 15,006 21,501 16,996 17,674 Segment operating expenses 10,518 10,665 11,759 16,600 12,889 13,093 14,478 20,498 16,072 16,517 Stock-based compensation and other

263 355

336 455

Segment operating income (loss)

254 703

588 702 Non GAAP operating income 290 329 (60) 733 517 1,058 528 1,003 924 1,157 International

Net sales 7,883 7,341 7,711 10,575 7,745 7,565 8,267 11,841 9,566 9,844 Segment operating expenses 7,916 7,343 7,885 10,510 7,821 7,584 8,323 11,781 9,546 9,756 Stock-based compensation and other

118 170

141 223

Segment operating income (loss)

(194) (189)

(121) -135 Non GAAP operating income (33) (2) (174) 65 (76) (19) (56) 60 20 88 AWS

Net sales 1,050 1,005 1,169 1,420 1,566 1,824 2,085 2,405 2,566 2,886 Segment operating expenses 805 928 1,071 1,180 1,301 1,433 1,564 1,718 1,850 2,023 Stock-based compensation and other

70 170

112 145

Segment operating income (loss)

195 391

604 718 Non GAAP operating income 245 77 98 240 265 561 521 687 716 863 Source: Amazon.com, Guotai Junan International. See the last page for disclaimer Page 7 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Alibaba Group's Ecosystem Evolution Media and cloud platforms will be 2 new drivers for Alibaba to expand its Ecosystem. 1) Three directions for expansion. Beside China retail, Alibaba Group is expanding to every service industries in China. Basically, Alibaba Group is expanding through 3 axes: TMT value Chain ( from media to cloud service to telecom), e-commerce expansion (from commodity transaction to service industry), and geographic expansion (from China rural area to overseas markets). Alibaba Group is becoming a online service conglomerate. Its core expansion formula: More revenue = more customers X more users' time X higher conversion rate X more value added services. 2) Media and cloud platforms will be the new support of Alibaba group's ecosystem. As some industries' innovations were far more complicated that China retails, such as finance, auto sales, Medicare, the new players have to build more intelligent products and service tools to reform the industries. Cloud service would be a key driver in the new intelligent products and service tools while media could bring more new customers to the innovators more easily. Figure 7: Alibaba Group's Ecosystem Evolution

Source: the Company, Guotai Junan International. Table 8: Alibaba Group's App Rank in 6M16

App Rank Name MAU Growth yoy DAU Female Ratio 2 Taobao 40,639 53.4% 14,480 51.9% 6 Alipay 31,399 69.3% 6,887 46.7% 7 Weibo 31,217 66.2% 8,764 54.3%

11 UC 22,725 30.8% 8,445 34.9% 13 Youku 21,434 9.9% 4,433 50.4% 26 AutoNavi 13,472 89.2% 1,788 31.7% 34 Didi 7,076 174.3% 1,173 38.0% 41 Momo 6,258 -13.9% 2,022 27.9% 42 Tmall 5,957 63.7% 925 46.0% 59 Tudou 4,211 22.6% 642 59.0%

104 Eleme 1,893 109.3% 259 46.8% 149 Xiami 1,326 144.0% 258 45.9% 172 Xianyu 1,060 291.9% 265 38.3% 181 Alitrip 973 53.5% 92 37.8%

Source: Questmobile, Guotai Junan International. See the last page for disclaimer Page 8 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Table 9: Quarterly Results of Alibaba Group 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 Income Statement 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E 1Q17E

Revenues mn RMB 15,771 16,829 26,179 17,425 20,245 22,171 34,543 24,184 32,154 32,859 49,090 35,399 Cost of Revenues mn RMB (4,585) (5,596) (7,520) (6,133) (6,711) (7,131) (10,951) (9,562) (11,744) (13,144) (17,673) (15,576)

Gross Proift mn RMB 11,186 11,233 18,659 11,292 13,534 15,040 23,592 14,622 20,410 19,715 31,418 19,824

Sales and Marketing Expenses mn RMB (1,952) (1,749) (3,021) (3,042) (2,241) (3,225) (3,641) (3,573) (3,988) (4,272) (5,400) (5,664)

General and Administrative Expenses mn RMB (944) (1,960) (2,419) (2,531) (2,244) (2,564) (2,500) (2,861) (3,614) (3,943) (4,418) (4,248)

Product Development Expenses mn RMB (1,212) (2,581) (3,083) (2,477) (3,241) (2,128) (3,749) (2,333) (2,743) (3,286) (4,909) (3,540)

Yahoo Tipla Amendment Payment mn RMB 0 0 0 0 0 0 0 0 0 0 0 0

Amortization of Intangible Assets mn RMB (234) (598) (614) (643) (647) (728) (1,268) (743) (1,251) (1,376) (1,514) (1,229)

Operating Profit mn RMB 6,844 4,345 9,522 2,599 5,161 6,395 12,434 5,112 8,814 6,839 15,177 5,143

Interest Expense mn RMB (410) (521) (1,344) (475) (477) (484) (475) (510) (626) (657) (690) (864)

Interest and Investment Income/(Loss), Net mn RMB 6,828 468 313 1,846 27,382 18,150 2,944 3,778 750 788 827 836

Other Income, Net mn RMB 711 378 901 496 551 429 1,607 (529) 1,763 1,851 1,944 1,942

Impairment of Goodwill, intangible Assets mn RMB 0 0 (175) 0 0 0 0 0 0 0 0 0

Provision for Income Tax mn RMB (1,445) (1,339) (2,429) (1,203) (1,394) (1,671) (3,559) (1,825) (2,091) (1,764) (3,451) (1,624)

Share of Results of Equity Investees mn RMB (90) (301) (805) (394) (407) (116) (495) (712) (1,468) (773) (811) (852)

Minority Interest (After Tax) mn RMB (34) (2) (47) 24 27 51 42 51 408 (35) (69) (32)

Net Income (Loss) mn RMB 12,404 3,028 5,936 2,893 30,843 22,754 12,498 5,365 7,550 6,248 12,925 5,610

Dividends on Preferred Stock mn RMB (52) 0 0 0 0 0 0 0 0 0 0 0

Preferred Stock Adjustments mn RMB (8) 0 0 0 0 0 0 0 0 0 0 0

Net Income Available to Common Shareholders mn RMB 12,344 3,028 5,936 2,893 30,843 22,754 12,498 5,365 7,550 6,248 12,925 5,610

China Retail GMV bn RMB 501 556 787 600 673 713 964 742 837 883 1,189 912

Desktop bn RMB 337 357 460 296 302 273 313 200 211 196 228 148

Mobile bn RMB 164 199 327 304 371 440 651 542 626 687 961 764

Taobao marketplace bn RMB 342 380 494 381 427 438 559 449 508 521 664 537

Tmall 159 176 293 219 246 275 405 293 329 362 525 374

Retail Ecommerce Revenue mn RMB 12,639 12,769 21,275 13,049 15,712 17,267 28,714 18,340 23,383 23,454 37,623 23,790

Desktop mn RMB 10,185 9,050 14,855 7,802 7,698 6,747 9,968 5,256 5,536 4,904 6,397 3,547

Mobile mn RMB 2,454 3,719 6,420 5,247 8,014 10,520 18,746 13,084 17,514 18,550 31,227 20,244

Monentization Rate of retail GMV % 2.52% 2.30% 2.70% 2.17% 2.33% 2.42% 2.98% 2.47% 2.79% 2.66% 3.16% 2.61%

Desktop Monetization Rate on Desktop Retail GMV % 3.03% 2.54% 3.23% 2.64% 2.55% 2.47% 3.18% 2.62% 2.62% 2.50% 2.80% 2.40%

Mobile Monetization on mobile Retail GMV % 1.49% 1.87% 1.96% 1.73% 2.16% 2.39% 2.88% 2.42% 2.80% 2.70% 3.25% 2.65%

Revenue

China Commerce mn RMB 13,348 13,559 22,135 13,895 16,709 18,313 29,876 19,423 24,644 24,761 39,070 25,133

Retail mn RMB 12,639 12,769 21,275 13,049 15,712 17,267 28,714 18,340 23,383 23,454 37,623 23,790

Wholesale mn RMB 709 790 860 846 997 1,046 1,162 1,083 1,261 1,308 1,447 1,343

International Commerce mn RMB 1,469 1,617 1,763 1,637 1,746 1,836 2,062 1,985 2,549 2,631 3,054 2,920

Retail mn RMB 358 419 554 437 501 481 632 590 1,117 1,073 1,409 1,316

Wholesale mn RMB 1,111 1,198 1,209 1,200 1,245 1,355 1,430 1,395 1,432 1,558 1,645 1,604

Cloud Computing and Internet Infrastructure mn RMB 236 285 362 388 485 649 819 1,066 1,243 1,623 1,966 2,558

Others mn RMB 718 1,368 1,919 1,505 1,305 1,373 1,786 1,710 3,670 3,844 5,001 4,788

Total mn RMB 15,771 16,829 26,179 17,425 20,245 22,171 34,543 24,184 32,106 32,859 49,090 35,399

Non GAAP

Non GAAP EBITDA mn RMB 8,574 8,493 15,103 8,583 10,585 11,146 19,111 11,498 14,963 10,415 20,677 8,418

Non GAAP net profit mn RMB 7,317 6,808 13,115 7,741 9,496 9,252 16,358 7,635 12,187 11,434 20,148 10,939

Growth%

Non GAAP operating profit % 40.7% 30.6% 34.3% 24.6% 23.5% 31.2% 26.5% 34.0% 41.4% -6.6% 8.2% -26.8%

Non GAAP net profit % 53.1% 15.5% 25.3% 16.0% 29.8% 35.9% 24.7% -1.4% 28.3% 23.6% 23.2% 43.3%

Expenses Ratio % 27.5% 40.9% 34.9% 49.9% 41.4% 39.0% 32.3% 39.3% 36.1% 39.2% 33.1% 41.5%

Sales and Marketing Expenses % 12.4% 10.4% 11.5% 17.5% 11.1% 14.5% 10.5% 14.8% 12.4% 13.0% 11.0% 16.0%

General and Administrative Expenses % 6.0% 11.6% 9.2% 14.5% 11.1% 11.6% 7.2% 11.8% 11.2% 12.0% 9.0% 12.0%

Product Development Expenses % 7.7% 15.3% 11.8% 14.2% 16.0% 9.6% 10.9% 9.6% 8.5% 10.0% 10.0% 10.0%

Amortization of Intangible Assets % 1.5% 3.6% 2.3% 3.7% 3.2% 3.3% 3.7% 3.1% 3.9% 4.2% 3.1% 3.5%

Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 9 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Valuation Raise TP to USD120.00 and maintain ‘Buy’ investment rating. Alibaba Group's Ant Financial, Aliyun, and Lazada, might begin to contribute more value. Aliyun will become a key revenue driver in 3 years, which might gradually boost Alibaba Group's valuation. The Tmall Duel 11 promotion will be a great catalyst for Alibaba Group's price in 4Q16. Our FY17-FY19 Non GAAP net profit estimates are RMB53.9 bn, RMB67.1 bn and RMB83.3 bn. Our TP of USD120.00 represents 30.7x FY18 Non GAAP PE. Table 10: Peers Comparison

Company

Stock Code Currency

Last price

Market Cap Non GAAP PE GAAP PE EV/EBITDA

Non GAAP PEG

mn HKD FY14F FY15F FY16F FY17F FY14F FY15F FY16F FY17F FY15F FY16F FY17F FY15-17 Global Large Ecommerce Conglomerate Alibaba Group Holding-Sp Adr BABA US USD 97.00 1,876,889.2 55.9 44.4 36.3 29.7 n.a. 59.9 20.8 42.7 38.6 29.2 22.4 1.6

EBay Inc EBAY US USD 30.61 267,986.4 10.4 16.8 16.2 14.8 (549.5) 17.8 18.6 17.7 8.7 7.4 7.1 2.5

Amazon.Com Inc AMZN US USD 764.63 2,810,899.0 354.0 142.7 70.6 47.1 (1,006.1) 410.6 128.3 69.0 32.4 22.1 15.7 1.0

Yahoo Japan Corp 4689 JT JPY 427 188,789.9 19.0 18.6 14.2 18.2 19.4 18.6 14.2 18.2 9.2 7.8 8.6 14.0

Rakuten Inc 4755 JT JPY 1297 144,162.7 354.0 26.5 28.6 22.0 31.8 27.4 28.7 22.1 13.6 13.1 10.6 2.9

Simple Average 158.7 49.8 33.2 26.4 (376.1) 106.8 42.1 33.9 20.5 15.9 12.9 4.4

Weighted Average 218.8 93.8 52.5 37.6 (561.0) 241.8 77.8 54.0 32.1 23.1 17.3 1.8

China Vertical Ecommerce

Jd.Com Inc-Adr JD US USD 25.39 272,477.2 2,821.1 n.a. n.a. 141.8 n.a. (87.2) (65.1) (202.4) n.a. n.a. 130.3 n.a.

Vipshop Holdings Ltd - Ads VIPS US USD 16.25 73,884.8 52.9 30.7 23.5 18.4 13.1 6.0 4.5 n.a. 25.0 18.1 12.5 0.8

Jumei International-Adr JMEI US USD 4.83 5,492.0 8.8 20.9 12.0 7.4 n.a. 30.2 23.4 n.a. 12.5 6.0 2.4 0.2

Dangdang Ecommerce Dang US USD 53.7 58,955.0 271.2 n.a. n.a. 39.5 759.5 n.a. n.a. n.a. n.a. 65.6 21.7 n.a.

Ctrip.Com International-Adr CTRP US USD 46.38 166,215.4 136.4 38.6 129.9 44.4 122.5 9.4 (9.8) 11.8 160.8 n.a. 43.2 n.a.

Simple Average 658.1 30.1 55.1 50.3 298.4 (10.4) (11.7) (95.3) 66.1 29.9 42.0 0.5

Weighted Average 1,406.0 15.2 40.5 86.2 114.6 7.1 (32.7) (92.1) 49.6 9.1 77.8 0.1

China Internet Conglomerate

Tencent Holdings Ltd 700 HK HKD 202.8 1,919,768.9 63.8 50.9 37.6 29.1 80.2 51.9 36.4 28.0 36.9 25.3 19.3 1.2

Baidu Inc - Spon Adr BIDU US USD 172.73 463,773.6 26.6 31.2 38.1 26.9 27.4 32.2 38.3 26.1 24.9 22.0 16.3 5.0

Simple Average 45.2 41.1 37.8 26.9 53.8 42.1 37.3 27.0 30.9 23.7 17.8 3.1

Weighted Average 56.5 47.1 37.7 26.9 69.9 48.1 36.8 27.6 34.5 24.7 18.7 1.9

Global Internet Conglomerate

Apple Inc AAPL US USD 109.22 4,563,663.9 16.8 12.0 13.3 12.1 14.9 11.1 12.9 12.5 5.4 6.6 6.2 (17.2)

Google Inc-Cl C GOOG US USD 779.91 4,219,602.8 30.4 26.9 22.8 19.3 39.2 34.2 28.3 23.7 15.9 13.0 10.6 1.3

Microsoft Corp MSFT US USD 57.56 3,478,136.7 21.4 22.1 21.6 19.9 20.0 36.9 26.6 23.2 11.2 11.5 10.9 4.0

Face book Inc-A FB US USD 124.37 2,769,151.2 73.6 57.4 31.7 24.5 123.0 106.9 41.8 29.5 31.7 19.5 14.3 0.6

SoftBank Corp. 9984 JT JPY 6457 601,834.6 14.6 11.1 14.0 8.2 15.2 11.1 13.4 9.1 7.7 7.0 7.4 0.8

Simple Average 31.4 25.9 20.7 16.8 42.5 40.0 24.6 19.6 14.4 11.5 9.9 (2.1)

Weighted Average 31.5 26.3 21.0 17.9 41.8 40.0 25.2 20.8 14.3 11.7 9.9 (3.7)

Simple Average 254.8 36.7 34.0 30.8 (20.7) 48.6 22.6 9.4 29.0 18.3 21.2 1.3

Weighted Average 108.7 43.1 30.1 24.9 (87.2) 83.6 36.6 26.1 21.1 15.5 14.1 (1.8)

Source: Bloomberg, Guotai Junan International, as at 18 August 2016.

See the last page for disclaimer Page 10 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Financial Statements Income Statement (Mar End Fiscal Year mn RMB) FY15A FY16A FY17E FY18E FY19E Balance Sheet (Mar End Fiscal Year mn RMB) FY15A FY16A FY17E FY18E FY19E

Revenues 76,204 101,143 149,503 190,629 248,664

Current Assets

Cost of Revenues (23,834) (34,355) (58,136) (70,738) (94,976)

Cash and Cash Equivalents 108,193 106,818 149,503 190,629 248,664

Gross Profit 52,370 66,788 91,367 119,892 153,688

Investment Securities 3,658 4,178 4,596 5,055 5,561

Sales and Marketing Expenses (9,764) (12,680) (19,324) (23,838) (30,821)

Short-term Investments 14,148 4,700 5,170 5,687 6,256

General and Administrative Expenses (7,854) (10,169) (16,223) (17,157) (21,529)

Loans Receivable, net 835 0 0 0 0

Product Development Expenses (9,353) (11,451) (14,478) (18,528) (24,694)

Prepayments, Receivables and Other Assets 12,978 17,028 29,215 21,329 44,603

Amortization of Intangible Assets (2,089) (3,386) (5,370) (3,506) (4,908)

Restricted Cash and Escrow Receivables 2,297 1,346 1,481 1,629 1,792

Impairment of Goodwill, intangible Assets (175) 0 0 0 0

Total Current Assets 142,109 134,070 189,964 224,329 306,875

Operating Profit 23,135 29,102 35,972 56,864 71,737

Interest Expense (2,750) (1,946) (2,728) (3,563) (7,376)

Non Current Assets

Interest and Investment Income/(Loss), Net 9,455 52,254 3,200 291 366

Property and Equipment, net 9,139 13,629 34,073 78,367 180,244

Other Income, Net 2,486 2,058 7,500 4,904 6,998

Investment Securities 14,611 29,392 35,270 42,324 50,789

Earnings before Taxes 32,326 81,468 43,945 58,496 71,725

Investment in Equity Investee 33,877 91,461 63,725 57,185 58,383

Provision for Income Tax (6,416) (8,449) (8,740) (11,699) (14,345)

Goodwill 41,933 81,645 82,461 83,286 84,119

Share of Results of Equity Investees (1,590) (1,730) (3,904) (3,856) (4,687)

Land Use Rights 3,105 2,876 3,609 4,325 5,025

Minority Interest (After Tax) (59) 171 275 (234) (287)

Intangible Assets 6,575 5,370 3,506 4,908 6,380

Net income attributable to Alibaba Group 24,261 71,460 31,576 42,707 52,406

Prepayments, Receivables and Other Assets 4,085 6,007 7,010 5,118 10,703

Dividends on Preferred Stock (97) 0 0 0 0

Total Non Current Assets 113,325 230,380 229,655 275,514 395,643

Preferred Stock Adjustments (15) 0 0 0 0

Total Assets 255,434 364,450 419,619 499,843 702,518

Net Income Available to Common Shareholders 24,149 71,460 34,552 42,707 52,406

Non GAAP net income 34,981 42,741 53,946 67,129 83,336

Current Liabilities

Basic EPS 10.330 29.070 13.648 18.103 22.474 Accrued Expenses, Accounts Payable, and Other

liabilities 19,834 27,334 49,119 40,030 74,461

Diluted EPS 10.330 29.070 13.643 18.097 22.467

Secured Borrowings 0 0 0 0 0

Non GAAP Diluted EPS 9.700 27.890 22.482 27.468 33.994

Current Bank Borrowings 1,990 4,304 1,567 3,335 6,813

Numbers of Basic Shares mn 2,337 2,458 2,532 2,608 2,686

Income Tax Payable 2,733 2,790 3,348 4,018 4,821

Numbers of Diluted Shares mn 2,338 2,459 2,533 2,609 2,687

Deferred Revenue-customer Advances 7,914 10,297 14,435 14,089 19,191

Merchant Deposits 7,201 7,314 19,086 16,268 31,200

Escrow Money Payable 0 0 0 0 0

Cash Flow Statement (Mar End Fiscal Year mn RMB) FY15A FY16A FY17E FY18E FY19E

Total Current Liabilities 39,672 52,039 87,556 77,740 136,487

Operating Activities

Net Income 24,320 71,289 31,301 42,941 52,693

Non Current Liabilities

Depreciation and Amortization 4,415 6,701 (1,378) (13,447) (34,175)

Non-current Bank Borrowings 50,603 53,467 38,335 81,578 166,647

Share-based Compensation Expense 13,028 16,082 17,176 20,682 25,736

Deferred Revenue 445 418 586 572 779

Share of Results of Equity Investees 1,590 1,730 3,904 3,856 4,687

Deferred Tax Liabilities 4,493 6,471 7,765 9,318 11,182

Income Tax Payable 1,410 57 558 670 804

Other Liabilities 11,974 32,552 32,292 32,511 32,875

Deferred Income Taxes 1,659 1,226 2,185 2,925 3,586 Total Non Current Liabilities 67,515 92,908 78,978 123,979 211,483

Loan Receivable (11,674) 0 0 0 0 Total mezzanine equity 658 350 420 504 605

Other non cash gains or loss (6,486) (47,755) 0 0 0 Noncontroling Interest 11,974 32,552 32,292 32,511 32,875

Working Capital Change 12,955 7,506 13,412 (2,637) 25,651 Total Alibaba Group Holding Limited

shareholders’ equity 145,439 216,987 251,539 291,270 359,108 Deferred Revenue and Customer Advances 1,317 2,350 4,306 (360) 5,309 Total Shareholders’ Equity 157,413 249,539 280,840 323,781 376,474

Merchant Deposits 2,490 113 9,117 (2,819) 14,933 Total Liabilities, mezzanine & Shareholders’

Equity 255,434 364,450 418,100 496,611 695,916

Prepayments, Receivables and Other Assets (2,253) (4,012) (21,661) 9,778 (28,858)

Accrued Expenses, Accounts Payable and Other Liabilities 11,415 8,104 21,785 (9,088) 34,431

Restricted Cash and Escrow Receivables (851) 951 (135) (148) (163) Key Indicators FY15A FY16A FY17E FY18E FY19E

Escrow Money Payable 837 0 0 0 0 Non-GAAP gross profit 56,546 70,791 95,524 122,751 157,418

Cash Flow from Operating Activities 41,217 56,836 67,158 54,990 78,981 Non-GAAP operating profit 37,040 48,570 58,518 81,052 102,380

Investing Activities Non-GAAP EBITDA 40,699 52,340 54,474 64,099 63,297

Capital Expenditure (7,705) (10,845) (17,135) (32,166) (69,073) Non-GAAP net profit 34,981 42,741 56,938 71,650 91,333

Investment (35,221) (47,614) (44,009) (47,552) (51,477) Stock-Based compensation 13,028 16,082 17,176 20,682 25,736

Disposals of PPE, intangible assets and investment (233) 17,088 18,797 20,676 22,744 Growth YoY

Others (10,295) (1,460) 402 (1,803) (3,886) Revenue 45.1% 32.7% 47.8% 27.5% 30.4%

Cash Flow from Investing Activities (53,454) (42,831) (41,945) (60,844) (101,693) Non-GAAP Gross Profit 40.4% 25.2% 34.9% 28.5% 28.2%

Financing Activities Non-GAAP Operating profit 31.5% 31.1% 20.5% 38.5% 26.3%

Net Bank Borrowings 19,891 2,478 (16,350) 46,724 91,917 Non-GAAP EBITDA 32.4% 28.6% 4.1% 17.7% -1.3%

Net Secured Borrowings 6,153 0 0 0 0 Non-GAAP Net profit 26.7% 22.2% 33.2% 25.8% 27.5%

Share issuance or repurchase 61,334 (19,102) 0 0 0 Margin% (GAAP)

Others 119 778 33,822 257 (11,171) Non-GAAP Gross margin 74.2% 70.0% 63.9% 64.4% 63.3%

Cash Flow from Financing Activities 87,497 (15,846) 17,472 46,981 80,746 Non-GAAP Operating margin 48.6% 48.0% 39.1% 42.5% 41.2%

Other Adjustments Non-GAAP EBITDA margin 53.4% 51.7% 36.4% 33.6% 25.5%

Foreign Exchange Rate Effect (112) 466 0 0 0 Non-GAAP Net margin 45.9% 42.3% 38.1% 37.6% 36.7%

Cash Flow Net Changes in Cash 75,148 (1,375) 42,685 41,127 58,035 Monetization Rate 2.44% 2.59% 2.83% 2.87% 3.05%

BB 33,045 108,193 106,818 149,503 190,629 monetization rate in Desktop Retail GMV 2.89% 2.73% 2.60% 2.45% 2.27%

EB 108,193 106,818 149,503 190,629 248,664 monetization rate in Mobile Retail GMV 1.79% 2.51% 2.88% 2.92% 3.10%

Ad monetization rate in Retail GMV 1.53% 1.69% 1.94% 1.90% 2.00% Commission monetization rate in Retail GMV 0.87% 0.84% 0.87% 0.95% 1.03% Source: the Company, Guotai Junan International.

See the last page for disclaimer Page 11 of 12

18 A

ugus

t 201

6 A

libab

a G

roup

阿里巴巴

集团（

BA

BA

US）

Com

pany

Rep

ort

Company Rating Definition The Benchmark: NASDAQ Composite Index Time Horizon: 6 to 18 months

Rating Definition Buy Relative Performance>15%;

or the fundamental outlook of the company or sector is favorable. Accumulate Relative Performance is 5% to 15%;

or the fundamental outlook of the company or sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral.

Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector Rating Definition The Benchmark: NASDAQ Composite Index Time Horizon: 6 to 18 months

Rating Definition Outperform Relative Performance>5%;

or the fundamental outlook of the sector is favorable. Neutral Relative Performance is -5% to 5%;

or the fundamental outlook of the sector is neutral. Underperform Relative Performance<-5%;

or the fundamental outlook of the sector is unfavorable. DISCLOSURE OF INTERESTS

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for SMI Holdings Group Limited (00198 HK), China All Access (Holdings) Limited (00633 HK), Guotai Junan International

Holdings Limited (01788 HK), Binhai Investment Company Limited (02886 HK) and Link Holdings Limited (08237 HK), Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months.

DISCLAIMER This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services and etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. © 2016 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk

See the last page for disclaimer Page 12 of 12