On May 18, 2017, Ali announced the Q4 results of fiscal year 2017 and the annual financial report (Note: As of March 31st, Ali’s fiscal year, the 2017 Annual Report disclosed the financial data from 2016Q2-2017Q1.）。
The financial report shows that Ali’s revenue in Q1 of 2017 was 38.58 billion, a year-on-year increase of 60%; At the end of the quarter, the monthly mobile users reached 507 million; Total transaction amount in FY 2017（GMV）About 3.8 trillion; The fiscal year revenue was 158.27 billion yuan, a year-on-year increase of 56%.
It is gratifying that Ali’s revenue has maintained rapid growth under the huge scale, but there is no doubt that the scale of e-commerce platform users is approaching the limit. It is worth noting that in the case that the "demographic dividend" is about to be exhausted, the market value of Ali has hit record highs, accounting for 300 billion US dollars.
On April 28th, Tiger Sniff’s book "Ali’s market value hit a two-year high, why did it increase so rapidly" discussed the global asset shortage, the convergence of capital to the "300 billion-dollar giant" and the market’s expectation for the "successor" of Ali’s capital operation.
Through the latest financial report data, we can get a general glimpse of Ali’s layout and financial health in response to the "post-dividend era".
The "demographic dividend" and "mobile dividend" have come to an end.
1)GMV’s "mobility"
In fiscal year 2017, Ali GMV was about 3.8 trillion. After exceeding 1 trillion in fiscal year 2013, the compound annual growth rate of GMV was 36.8%.
Today,Ali is still the only e-commerce platform in China with a total transaction amount exceeding 1 trillion.
Ali’s huge GMV has been highly "mobile": 79% of GMV in FY 2017 came from mobile terminals, an increase of 14 percentage points over FY 2016. In fiscal year 2014, the mobile GMV exceeded 300 billion yuan, and in fiscal year 2017 it was close to 3 trillion yuan, with an average compound annual growth rate of 110%.
2) Number of active users and per capita consumption
In fiscal year 2017, the total number of active buyers of e-commerce platforms was 454 million, with an average compound growth rate of 21.2% in the past three years.
In FY 2017, the contribution of each active buyer to GMV was 8,591 yuan, a year-on-year increase of only 7%, equivalent to spending 49.2 yuan more per month (The denominator is the average value of users at the beginning and end of the period.）。
3) All kinds of bonuses have been eaten to the tail.
The first generation of Internet companies are lucky. First, they get the world’s largest "demographic dividend" and then they get a rich "mobile dividend". As long as they can "get on the boat" and insist on not being squeezed out, they can easily get two or three-digit revenue growth. # What an era of blindfolded running #
Comparing enjoying the bonus to eating fish, we have eaten the "fish tail" today.
For example, the "demographic dividend", as of the end of March 2017, Ali’s active buyers reached 454 million, and the year-on-year growth rate has dropped to single digits; The annual per capita consumption of hundreds of millions of users has increased by seven percentage points, which is basically consistent with the GDP growth rate.
Another example is "mobile bonus". In the PC era, Internet users spend only a few hours a week surfing the Internet. In the mobile era, "24×7 online" has become the norm, and the traffic has increased geometrically. Due to the large number of food-sharing, companies from startups to Nasdaq listed companies are eager to buy, and the price of traffic is rising instead of falling. Only companies with abundant traffic, such as BAT, have successfully enjoyed this wave of dividends.
In the just-concluded fiscal year, the growth rate of Ali GMV, the number of active buyers and monthly users all slowed down significantly. The following figure shows the number of monthly mobile users in the last 14 quarters (Mobile MAUs）。
Statistics show that the number of mobile Internet users in China was close to 700 million at the end of 2016. Because it is difficult to apply for online banking under the age of 18 and cannot become an e-commerce platform user, 507 million monthly users are close to the number of adult mobile phone users.
With the popularity of the Internet and smart phones approaching saturation, the demographic dividend and mobile dividend have basically disappeared. The so-called "second half" refers to this situation (Note: The "second half" was proposed by Wang Xingyu in July 2016.）。
"A gentleman who reaches the Tao means reaching, and a poor man who reaches the Tao means being poor". If you are poor, you will think about change, change will make sense, and general rules will last for a long time. "The dividend is infinitely good, buried by the coming night", but Ali’s market value has reached a new high, indicating that its countermeasures and initial results have been recognized.
What does the capital market see?
The biggest attraction of the recent China Stock Exchange is that Ali’s share price has reached a new high, with an increase of more than 50% in the past 12 months and a market value of 300 billion US dollars.(Note: On May 19, 2017, the closing price was USD 123.22, with a market value of USD 307.5 billion).
When the market value of the company reaches hundreds of billions of dollars, no single capital force can dominate the world. Especially in the United States, where the short-selling mechanism is sound, as long as a "handful" of powerful capital thinks that the valuation is artificially high, the rally may be reversed.
Companies with a market value of billions to tens of billions of dollars are different. As long as a "handful" of strong capital supports them, high valuations can remain unchanged (Like qunar. com）。 Therefore, the consensus needed to promote the stock price rise of companies with market value of hundreds of billions of dollars is much higher than that of companies with market value of tens of billions of dollars.
Knowing that China’s demographic dividend and mobile dividend have come to an end, Wall Street has pushed Ali’s market value to a new high. On the one hand, it has seen the steady growth of the main business of e-commerce, and on the other hand, it is out of recognition of Ali’s "post-dividend era" layout.
1) The weight of core e-commerce business has declined.
In the past eight quarters, the proportion of Ali’s core e-commerce business revenue has dropped by 10 percentage points.
Due to the performance of "Double Eleven", the revenue and proportion of e-commerce business will form a "peak" in the fourth quarter of each year:
In Q4 of 2015, the revenue of e-commerce business was 34.5 billion, accounting for 93%;
In Q4 of 2016, the revenue of e-commerce business was 53.2 billion, up by 54% year-on-year, but the proportion dropped to 87%.
It is expected that the rise of cloud computing, digital media entertainment and other sectors will continue, and the proportion of e-commerce business in total revenue will further decline.
2) Cloud computing
In Q2 of 2015, the number of paying users in Alibaba Cloud was 263,000, with revenue of 485 million; At the end of 2016, the number of customers reached 2.3 million, of which 765,000 were paying users; In Q1, 2017, paying users and revenue reached 874,000.2163 billion respectively. In the same period, the quarterly expenditure of each paying user increased from 1840 yuan to 2470 yuan.
With the steady growth of revenue and the number of paying users, the economic benefits of Alibaba Cloud are improving day by day. In 2015, Q2 achieved 485 million revenue, but its operating loss reached 368 million, with a loss rate of 75.9%. The loss rates in the last three quarters were 3.8%, 5.2% and 7.8% respectively.
In Q1 2017, the EBITA loss of Alibaba Cloud business has narrowed to 169 million (Note: EBITA excludes equity incentives and amortization of intangible assets for operating profit.）。
In fiscal year 2017, Alibaba Cloud’s revenue reached 6.663 billion, up 120.7% year-on-year, achieving three-digit growth for two consecutive years.
According to IDC data, Alibaba Cloud is the largest public cloud service provider in China, with revenue exceeding the sum of the 2nd-10th places. At present, Alibaba Cloud computing has penetrated into the fields of consumer brands, energy, financial institutions, health care, manufacturing, media and retail, accounting for more than 40% of the cloud computing market in China.
According to the research report released by Deutsche Bank, Alibaba Cloud’s net income will surpass Google to enter the top three in the world in 2016.
With the first-Mover advantage, scale advantage and good performance, it is very likely that Alibaba Cloud will turn losses into profits in two or three years, when the door to the A-share market will be opened.
3) Digital Media and Entertainment
Ali’s "Digital Media and Entertainment" section is mainly composed of Youku Tudou, UC browser and Gaode map. The initial task of this sector is to play a synergistic role with the core e-commerce business. With the progress of user scale, content ability, technology and brand, the revenue has increased year by year, and the contribution rate to revenue is about 10%.
In Q1, 2017, the revenue of digital entertainment was 3.93 billion, up 234% year-on-year, accounting for 10.2% of the total revenue.
The financial report only discloses the revenue and EBITA of the whole sector in general. Under the influence of multiple factors, EBITA is elusive, but the overall loss is narrowing.
Although Alibaba Cloud and Youtu are still losing money, they are both on the right track, and their prospects as industry leaders are limitless. After all, the success of AWS and Netflix is just around the corner.
Although the dividend is exhausted, Ali’s position as the king in the field of e-commerce is worry-free, and cloud computing and digital media entertainment watered by abundant cash flow in e-commerce business have become a climate.
In addition, many companies in which Ali shares have become an organic part of the e-commerce ecology. Among them, the best is the rookie with an average daily parcel handling capacity of over 42 million pieces; Single season GMV reached a reputation of 75 billion.(Year-on-year increase of 257%)There is also Suning who is "beautiful in the Warring States and resistant to JD.COM".
It can be said that Ali is the most fully prepared Internet company in China for the "post-dividend era".
Financial health under diversification
Not afraid of diversification, I am afraid of LeTV’s diversification beyond its own strength. Cloud computing and digital media entertainment are still in the investment period, and they still need to share the losses of excellent soil, rookie and word of mouth. What is Ali’s financial health?
1) The "trunk" is thick.
Ali’s e-commerce business is obviously seasonal, with the peak of Q4 and the trough of Q1. Generally speaking, the peaks are higher and the valleys are shallower. For example, in 2016, Q4 revenue reached 46.58 billion, 45% higher than the previous peak; In Q1, 2017, the revenue was 31.57 billion, a year-on-year increase of 47.1%.
It is worth noting that the peak season revenue and profit rate are rising simultaneously. Operating profit margin in 2015Q4 and 2016Q4 (EBITA) are 65% and 64% respectively. This ratio was 59% in 2015Q1 and 2016Q1.
In FY 2017, the e-commerce business EBITA reached 82.43 billion. EBITA is the balance of gross profit after deducting the product expenses, market expenses and administrative expenses, excluding equity incentives and amortization of intangible assets, which is close to Non-GAAP net profit in connotation and equivalent to "net cash flow from operating activities" in amount.
According to this calculation, in FY 2017, the non-GAAP profit margin of Ali e-commerce business was 61.6%.
Internet companies in China are engaged in various businesses, such as portals, games, social networking, OTA, and e-commerce … Among them, many of them have a gross profit of over 50%, but few people have heard of them with a revenue of over 100 billion and a non-GAAP net profit margin of over 50%. For example, in the fiscal year ended December 31, 2016,Tencent’s non-GAAP net profit was 66.863 billion, and its non-GAAP net profit margin was 44%. While that in JD.COM is only 0.4%.
More than 130 billion revenues and more than 80 billion net cash inflows, as the backbone of Ali’s ecology, the core e-commerce business is extremely strong and growing.
2) Three expenses
The gross profit of a typical Internet company is quite high, generally above 70%. But whether it is profitable in the end depends on the product cost, market cost and administrative cost. The total cost of Qunar.com and 58 cities has exceeded 100% of revenue!
In fiscal year 2010, Ali’s three expenses totaled only 4.5 billion, and reached 45.6 billion in fiscal year 2017, with a compound annual growth rate of 39.2%.
However, in fiscal year 2010, the three expenses accounted for 67% of revenue, while in fiscal year 2017, they only accounted for 29%. This is the so-called "scale effect".
Because the financial report discloses the related expenses of e-commerce, cloud computing, digital media entertainment and innovative business, it is difficult for the outside world to know the allocation of these expenses in various businesses. butTo be sure, as far as e-commerce business is concerned, the proportion of three expenses to revenue will be lower..
3) "big horse-drawn car", no blame.
The 2017 financial report discloses the benefits of four sections (EBITA), only the core e-commerce sector makes money, and the three sectors of "cloud computing", "digital media entertainment" and "innovative business" all lose money.
In Q2 of 2015, the three "loss-making sections" EBITA totaled 1.53 billion, and in Q1 of 2017 it rose to 2.56 billion. During the eight quarters, it burned a total of 16.67 billion.
Nowadays, the imagination of cloud computing and digital media entertainment has even been recognized in the capital market, with less than 20 billion yuan burned and the market value soaring by 100 billion US dollars. From the point of view of valuation alone, this more than 10 billion burned value.
More importantly, burning two or three billion yuan in a single season seems like a lot, but the "robust" e-commerce business can easily bear this "drag". In Q1, 2017, the total loss of the three loss-making businesses was less than one-sixth of the e-commerce business EBITA (13.8%）。
Again, Internet companies are not afraid of burning money, and it is good to "burn money" within a controllable and affordable range.
A big horse-drawn cart is blameless, but a small horse-drawn cart is in danger.
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