COMPANY NOTE
Initiating Coverage

27 October 2014

CHN | Technology | Internet

BUY
Price target $118.00
Price $95.76

The Powerful E-Commerce Ecosystem
Connecting Half of China; Initiate at Buy
Key Takeaway
China's changing Internet user demographics and mobile development support our favorable view on e-Commerce for the next decade. Alibaba is the largest Chinese ecommerce player, with 80%+ GMV market share, but is only selling to less than 25% of the population now. We estimate well over half of
Chinese population will be shopping on Alibaba’s platforms in 10 years. Initiate with Buy; PT USD118.
Changing demographics & mobile support ecommerce in the next decade. As discussed in our sector note, "A Taste of Domestic Consumption: The Unleashing of China's
E-Commerce Power" published on Sept 19, 2014, China’s e-Commerce growth for the next decade benefit from: 1) changing Internet user demographics towards 30+ year old age groups; 2) accelerating structural shift to online from traditional retail; 3) Chinese government’s massive support for urbanization and domestic consumption; 4) proliferation of affordable smart devices; 5) improving wireless and transport infrastructures in lower tier and rural markets, and 6) rising consumer demand for better quality, design & fashion, authenticity and timely delivery.
Growth driven by mix shift towards Tmall, and improving mobile monetization.
We expect Alibaba, as the largest e-Commerce player, to sell to well over half of the
Chinese population in 10 years, up from less than 25% now. We estimate FY14-17E revenue
CAGR of 36%, driven by continued commission revenues from Tmall. Alibaba’s mobile
GMV accounted for 32.8% of total GMV in FY1Q15, +21pcpt YoY. We expect the mobile monetization rate to narrow the gap with that of PC.

Financial Summary
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