Alibaba, the problem behind profits

Author | Cheng Yu

Professional investor, understanding app expert

The following is August 5th Teacher Cheng Yu's understanding of the applet

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Key points: The evaluation of Ali, the focus of attention is basically clear now, one is its gross profit margin, and the other is how much its investment business pressure is.

1. Alibaba Mao's profit margin decreased

Last night, Ali released the financial report in the first quarter of fiscal year in FY2023, as of the second quarter of June 30 this year. Looking at the balance sheet of the financial report, I also compared it to the balance sheet of September last year. In terms of structure, there was no major change. In other words, Ali's business structure, asset quality, and its operating risks have not changed substantially, which is the first point.

But if you look at the profit statement of Ali, you will find that the pressure on Ali is actually quite high. Yesterday Ali also held a performance conference, and Ali also explained its related operations from the data of various operations. But as an investor, in fact, the most concerned is not what he said at the meeting, but what it reflects in its financial figures. In the words of Buffett, accounting is the language of business. So today's analysis of Ali, we are mainly based on its financial data.

One of the most direct impacts reflected in Ali's profit sheet is that its net profit dropped by 22.4 billion yuan. I did not calculate how much it declined, but it is estimated that it has also exceeded 50%. According to this number, according to this number Looking at it, in fact, the net profit has fallen obvious. Through the data of its profit statement, we also found two very important issues.

First of all, what is the main reason for the decline in Ali's net profit so much? After calculating, I found that there were three main points. First, Ali's gross profit margin decreased. As a result, its operating profit decreases. Second, its investment income declines significantly. Therefore, on the basis of the decline in operating profit, it has led to a decline in pre -tax profit. At the same time, it has also declined again. It was changed from last year's profit to this year's floating loss, which eventually caused its net profit to decline significantly. Ali's net profit decreased by 22.4 billion yuan year -on -year, and its operating profit decreased by 5.9 billion. Investment income decreased by 8.7 billion, and the income subject of the equity law decreased by about 9.5 billion. Therefore, the three additions have constituted the main part of the decline in Ali's net profit.

What are the problems of the income of these three subjects? First of all, the main reason for the decline in the profit of Ali business is the decline in gross profit margin. Its gross profit margin was 39.68%in the same period last year. This year's gross profit margin is 36.92%, which may only drop less than three percentage points, but it is indeed obvious on Ali's operating profit, and this data actually has two meanings for all companies.

First, if the gross profit margin is measured from a market perspective, it generally measures the market. The market faced by the enterprise is at a rising period or a decline. If it is on the rise, the gross profit margin of the enterprise will often increase, or it will be maintained at a higher level. However, if the market is facing a shrinking environment, the competition within the enterprise will intensify, and the competition within the industry will intensify. This will cause the gross profit margin of enterprises to cause large downward pressure, so this contains a market -oriented indicator.

Second, the indicators also reflect the competitive advantage of enterprises in the market and their peers, reflecting the gap between competition with their peers. The stronger your strength, the greater the advantage of defending your gross profit margin. At the same time, there is another situation that if the industry's competitiveness is increasing, other competitors are constantly eroding your competitiveness, and the gross profit margin of the company will decline Essence

Therefore, we look at Ali's total gross profit margins, which shows that first, the Chinese e -commerce industry faced by Ali is actually in a downward pressure. Because its gross profit margin is declining, Ali is the leader of Chinese e -commerce companies, indicating that the entire market is in a contracted state. The consumption atrophy of the central economic work conference at the end of last year, including the second quarter of our Prime Minister Li Keqiang opened 100,000 people in the second quarter The issues that repeatedly emphasized during the conference reflected were the same. Because e -commerce, especially Ali, exists in the consumer industry and consumer field, this reflects that my country's consumer field has been under great pressure.

Third, the decline in Ali Mao's profit margin shows that in the consumer industry with overall contraction. Competition between enterprises is intensified. At the same time, there are some companies that may be stronger than the original in some areas. They are stronger than Ali's competitiveness in these specific fields. I guess Pinduoduo's financial report may be a little better than Ali, including Douyin, as well as Weishang and other live broadcast fields that will also divide Ali's market. In addition, in the shrinking consumer market, the trend of consumer downgrade is definitely unavoidable. Some low -cost areas are not very good at Ali, so in those areas, Ali will be eroded by these companies, including some emerging niche and apps in the e -commerce field at the rear. the trend of. These areas of consumption downgraded are not what Ali is good at. Ali should be eroded by these companies. Therefore, the decline in gross profit margin indicates that Ali is now in a shrinking market. At the same time, due to the downgrade of consumption, Ali's competitiveness is constantly eroded. Second, Ali investment income decreases

The latter two main reasons, the decline in investment income and the investor share of the investor calculated by the equity law. These two are obviously investment subjects, but Ali did not explain in detail what these two subjects were included in the first quarter newspaper, so we are not good at confirming which income that belongs to fair value changes and which belongs to normal investment income. , But in general, it is an investment income. At least it contains these two types of income. From the decline in the income of these two subjects, it can be seen that the income of Ali's important investment business is also declining.

Investment business can be said to be the unified business of these major Internet factories in China. It is no wonder that these large manufacturers generally have accumulated a lot of cash in their hands. If they do not invest in, lying on the account is also a waste. Moreover, investment can also form a good asset ecological relationship with your own business, so investment business is a necessary business for Internet manufacturers. But this business has a characteristic that it is easy to be affected by the capital cycle.

Since the beginning of this year, the Federal Reserve has other major global central banks in the trend of greatly shrinking capital, especially the Federal Reserve. So far, it is still a state of eagle interest rates. Significantly contracted. In the past ten years, since the last financial crisis, basically global investment in the technology industry is a very hot hotspot and a place where capital has flowed sharply. Therefore, the global industry is very popular. There can be a fire on the top, such as the shared bicycle business of the year, as well as community group purchase, and so on. These at a glance, you know that it can't make money in the past. As a result, it is enthusiastically supported by capital. What is the reason? Because it has the concept of the Internet. Therefore, this represents a bubble state in the capital market where the technology industry is in the past, but Ali cannot wait for the bubble to invest, so the investment assets accumulated before will inevitably receive the capital cycle. The extensive impact of downward.

It mainly has an impact on two categories, and one is the decline in fair value. Because the capital is shrinking, the cost of the entire capital is rising, the cost of capital can be used for investment has increased, and the yield of assets is higher. Value will naturally decrease. For Ali, this is a major reason for the reduction of income in investment business. In addition, it is that the company itself invested by itself will also be affected by the entire capital cycle.

Because of the contraction of the entire capital cycle, it will lead to a reduction in cash income of people and enterprises in the society, and it will naturally cause demand to decrease. The decline in market demand, the revenue of enterprises will decrease, and it will inevitably lead to a decline in corporate profits. The decline in profit, as a shareholder, naturally decreases the shared income. Therefore, according to the equity law, the income that Ali's investment business can be shared will also be reduced.

Therefore, as far as Ali's investment business is concerned, it will face the fair value of the global capital cycle contraction, and there are dual pressures of decreased operating income caused by the shrinking of market demand for investment companies. We see that the decline in the decline in Ali this quarter, from the three subjects, in fact, its investment business caused the profit loss to it is the largest. The loss of investment income is 8.7 billion. The performance share of the investor based on the equity law decreased by 9.5 billion year -on -year. It can be said that these two subjects together have constituted a main reason for its decline in net profit.

We have to think of Tencent, because in fact Tencent's first quarter report is to make the losses in their investment in other comprehensive income. It is not reflected in the net profit, but it is reflected in other comprehensive income. If you go to the first one, you will find that it will make a loss from the first quarter to a loss. Therefore, the assets of investment accumulated by these Internet factories in the past development process may withstand greater pressure in the capital contraction cycle, and have greatly affected their net profit and final income.

One of the two major factors of Ali's net profit decreased, one is that its hair profit margin decreases, and the other is the decrease in investment income. Through the analysis of these two factors, we combined with the current market conditions to see where the main problems in Ali are. First of all, as far as its main business is concerned, it is the part of its fur profit margin. The market environment is shrinking. Although China's consumer market is shrinking, the consumer market in other places has risen. The foundation of Ali's decline in profit is the decline in gross profit margin. The first problem it must solve is how to increase its gross profit margin and lay a solid foundation for its profit statement. From this point of view, in order to improve your gross profit margin, you must first adhere to the scope of your core competitiveness business to find a new market and field. Although the Chinese market is shrinking, the consumption of other markets is consumption. Expansion, such as the United States, Europe, and Southeast Asian markets. Therefore, Ali's international business is to be a focus of its development. First, this field is what Ali is best at, and it is its advantage. Second, this field is also the largest opportunity for the future market, so this is both its advantage and opportunity. This market cannot be missed. It is its strategic focus. Let's pay attention to the development of Ali's international business later.

3. The development direction of Alibaba Cloud business

Let me talk about the point of view of the Alibaba Cloud market. In my opinion, including Ali itself also thinks that the cloud market is one of its focus. From the perspective of the market itself, in the future, the entire area of ​​clouds should also be the key market for its development. But Ali's strategy is a bit problematic from my perspective. Because the cloud market is actually a situation, it is a foundation for our social informationization and intelligence in the future, and it can be said to be an emerging infrastructure. As an emerging infrastructure, the importance is self -evident, but for an enterprise, the most important thing is whether it can bring me a higher gross profit margin, and whether you can bring me more Most profits are the most realistic. No matter which company provides cloud services, it must be the service industry. Since it is providing services, it must be able to create more value for these customer companies to get higher profit margins. This is an economic law, but for cloud computing, what kind of field can give customers higher value?

I think that as of this development stage, cloud computing infrastructure may create higher value for customers, not in the field of consumption, nor is it in the service field. A considerable part of the service field can also be created, such as the logistics industry and related productive service industries. The real core data value and service value, I think it should be in the industrial field. Cloud computing should be an important infrastructure of industrial Internet and industrial intelligence.

There are two factors that are reflected in this, one is the ability of your cloud computing infrastructure service. That is, your cloud platform itself, you have basic requirements for data security, system stability, and compatibility. Another most important competitiveness is your service ecology of a specific industry. If it is an information infrastructure that serves industry, it must be able to improve the service capabilities of enterprise industrial technology competitiveness in a specific industrial industry.

On the cloud platform, customers can find a lot of solutions that can be available at any time, very advanced industrial -related data and information tools. This is a problem that serves industrial software, not the problem of compatibility, security, and stability of the cloud platform. In this way, the software system of the cloud server requires the ecosystem that the ecosystem must be able to target industry and the specific characteristics of the industry to form a relatively powerful solution.

In this way, companies can get greater benefits when using the cloud platform. If I can't get such a high ability elsewhere, you can get higher capabilities to improve production efficiency and efficiency in all aspects, then I can create more profits. Of course It's right. Then the cloud platform can also obtain higher profit margins on the company. Therefore, if we measure the cloud service business from the perspective of profit margins and gross profit margins, I think the most important market should be in the industrial market.

The relationship between the platform and the ecology, I think Ali also explained in yesterday's financial report, that is, the integration of cloud nails. Nailing is to serve the enterprise. In fact, it is also an ecological tool. It is in line with the infrastructure of the cloud platform. In fact, it cooperates with each other. With efficient ecological tools, the cloud business can better serve the company. In fact, it reflects it. It is the value relationship of cloud ecology on enterprises.

But nailing is not a targeted and specific ecosystem of a certain industry, it is universal. So I think that if Ali wants to increase the gross profit of its business, it can combine its cloud service with the specific industrial field. Of course, this road is not easy to follow, because there is an ecological problem here. The infrastructure is easy to do and the ecology is not easy to do. Because of the software ecology in the industry, you must have huge industrial software. And for the specific industry, it is not that your software information technology is advanced. The most important thing is that the industry's knowledge is rich enough, the industry's process experience and technology. It depends on the knowledge, technologies, and even science that you have precipitated in specific industries and specific areas. The more you have accumulated these contents, the richer the software can the software have better conditions to solve the problems in industry companies, and the efficiency of your software tools is the highest. However, industry knowledge is a process of accumulation, and it also depends on industry experts' attention and accumulation of knowledge. It requires industry experts to accumulate knowledge in this regard. Therefore, for Ali, China is not obvious in this regard. Ali can consider developing this aspect. Although the advantages are insufficient, it is necessary to really do it step by step, so if you go from the long -term perspective, go to the long -term perspective. If you look at it, I think that although it is not possible to increase the gross profit margin directly, it is indeed a market that has important strategic significance in the future, so I think that if Alibaba Cloud wants to have longer competitiveness, it must pay attention to industry Market, cut in from specific industries. In this regard, in fact, Huawei Cloud is more clear than Alibaba Cloud. When Ren Zhengfei was talking about Huawei Cloud, it said that Huawei Yun did not require how much market share, but it was required to have a specific industry. Go in.

From this point, Alibaba Cloud should pay attention to Huawei's strategy. It can be said that Huawei is right and must be stable. Ali must start as soon as possible in this regard to make arrangements. This is Ali's aspect of its gross profit margin. I think that the first problem of Ali first is to defend its gross profit margin. In this regard, it must cultivate a higher -gross profit margin business. In terms of international business, it cannot be let go, and it is a key business. Second, its cloud business must focus on the industrial field. This is an important but not urgent thing to do in the long run, and it is necessary to invest enough attention in the industrial field.

Fourth, somewhat

For investment business, at least in recent years, I think Ali will continue to face the pressure of contraction of the capital cycle in the future, which is difficult to escape. In this regard, Ali has done strategic investment before, and it is unlikely to completely withdraw these businesses. In the future, the investment business may still bring down pressure on Ali's profits. So we may continue to pay attention to the situation of Ali. Therefore, it should be a focus on Ali's short -term valuation and evaluation in all aspects.

For these big Internet factories, their valuation business is one of the focus of attention. Judging from Ali's first quarter report, the evaluation of Ali needs to pay attention to the focus of attention. It is basically clear. One is its gross profit margin, and the other is how much its investment business pressure is. The first quarter report of Ali, if we look at it from a financial perspective, we have to conclude that this is the case, which may be different from the perspective of these situations that Ali said at the telephone meeting, because they mainly say from the perspective of operation. In terms of corporate analysis, we still need to pay attention to financial data, because these aspects can reveal the real situation.

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