Alibaba-SW (9988. HK): Ali's organizational structure has changed again, and organizational efficiency and competitiveness are expected to be significantly improved

On March 28, Zhang Yong, chairman, and CEO of Alibaba Group, announced the launch of the "1+6+N" organizational transformation: under Alibaba Group, the establishment of Alibaba Cloud Smart, Taobao Tmall Business, Local Life, International Digital Six major business groups and multiple business companies including Commerce, Cainiao, and Dawenyu. The business groups and business companies set up boards of directors, respectively, and implement the CEO responsibility system under the leadership of the boards of directors of each business group and business company. Zhang Yong continues to be the chairman and CEO of the group board of directors to manage the strategy. Qualified business groups and companies can have independent financing and listing.

From the implementation of the "track strategy" at the start-up stage, incubating new businesses with old business needs and profits, to the implementation of "segment-based governance reforms" during the development and growth period, and actively embracing the company's current characteristics of multi-engine drive and multi-track product, Ali continues to promote production Relationships change to suit productivity status at different stages.

Under this reform plan, by establishing six major business groups and multiple business companies, Ali will significantly improve the previously complicated organizational structure of business groups, business departments, and business lines and is expected to simplify organizational levels and shorten decision-making links. , to improve organizational efficiency and strengthen decision-making response speed, the performance of the six business groups with higher flexibility will also be worth looking forward to. We believe that Alibaba's organizational changes are of positive significance to improving the company's competitiveness and are expected to bring better performance to the company.

During the period of rapid development of the Internet industry, Ali promoted the "China-Taiwan Strategy" in 2015, forming a unified whole under the governance model of "large, medium-sized and small front desks"; during the period of stock development of the Internet industry, Ali implemented diversified governance in 2020 The management responsibility system under the structure, through the establishment of some independent operating loop companies to create an agile organization.

The two reforms provide a reference for the corporate governance reform of Internet technology companies at different stages of industrial development. The demonstration effect of Ali's reform will continue to radiate China concept stocks. After the traffic dividends of China concept stock companies peak, corporate governance is expected to usher in an iterative wave. Optimizing its government is expected to bring operational efficiency to Internet companies and performance improvement.

Such a reform breakthrough will accelerate the elimination of inefficient businesses, promote the flow of resources to high-efficiency business segments, and further enhance the competitiveness of its core business. Changes in corporate governance capabilities will significantly increase the value of Internet companies. We are optimistic about the opportunities in the Hang Seng Technology sector and recommend Internet targets such as Alibaba.

Based on the improvement of the efficiency of the company's various business sectors and maintaining the previous profit forecast of the company, we expect the EPS in the 2023/2024/2025 fiscal year to be 6.0/7.6/9.4 yuan and the 2023-2025 fiscal year corresponds to a PE of 12.3/9.8/7.9 (based on The exchange rate on March 28, 2023, is based on HKD/RMB=0.88). Considering the company's business growth, competitive advantages, and barriers, we believe that the company's current valuation level has substantial investment value and maintains the company's "buy" rating.

Risk warning: competition in the e-commerce industry intensifies, overseas expansion is less than expected, and market regulation risks.