Alibaba net profit zooms up 193 per cent to 71.29 billion yuan

Chinese online retail giant takes aim at digital entertainment and international expansion in years ahead

PUBLISHED : Thursday, 05 May, 2016, 9:50pm
UPDATED : Friday, 06 May, 2016, 9:05am

Alibaba Group, the world’s largest e-commerce services company, aims to sharpen its spending on major domestic and overseas initiatives after posting record-high earnings for the fiscal year to the end of March.

“Going forward we are prepared to continue investing in high-potential businesses that are highly strategic to Alibaba, from digital entertainment to local services to international expansion,” Alibaba executive vice-chairman Joseph Tsai said in a conference call with analysts on Thursday night. “In these challenging times for the global economy, Alibaba is bucking the trend.”

In these challenging times for the global economy, Alibaba is bucking the trend
Joseph Tsai, Alibaba

Alibaba shares in the New York Stock Exchange climbed US$3.01 or 3.97 per cent to end Thursday at $78.83, dealing between $78.10 to $79.94. Volume was a heavy 27.62 million shares, nearly triple the average 10-day volume of 9.8 million shares. Alibaba stock is close to the middle of its 52-week trading band of $57.20 and $95.06.

The New York-listed company reported a 193 per cent jump in net profit to 71.29 billion yuan (HK$85.14 billion) in the 12 months to March, up from 24.32 billion yuan in the previous fiscal year.

Alibaba chief financial officer Maggie Wu attributed that hefty gain to a 21 per cent year-on-year increase in annual active buyers on the firm’s China online retail platforms, including Taobao Marketplace and, to 423 million at the end of March.

That led to a gross merchandise volume – the total value of goods sold on its domestic e-commerce platforms – of 3.09 trillion yuan in the fiscal year to March, compared with 2.44 trillion yuan a year earlier.

Alibaba’s total revenue climbed 33 per cent to 101.14 billion yuan, up from 76.20 billion yuan the previous fiscal year.

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Contributing to that revenue growth was its rising international online retail business, which saw a 25 per cent increase to 2.20 billion yuan from 1.77 billion yuan a year earlier.

“Our focus on long-term strategic priorities – globalisation, rural expansion, building a world-class cloud computing business and creating a comprehensive media and entertainment platform – has laid a strong foundation for future growth,” Alibaba chief executive Daniel Zhang Yong said.

In a report, Nomura analyst Shi Jialong said margins for Alibaba remained under pressure this fiscal year as the company continued to invest in businesses that were still loss-making.

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Those included mainland online video services provider Youku Tudou, which Alibaba recently took over in a US$4 billion deal, and Southeast Asian e-commerce services provider Lazada, for which Hangzhou-based Alibaba paid US$1 billion to acquire a controlling stake.

Tsai said Alibaba, which also owns the South China Morning Post, was “used to investing in long-term initiatives with long gestation periods” of from five to seven years.

“Being able to do this is a competitive advantage,” Tsai said. “I believe investing in strategic bets accrues long-term franchise value to Alibaba, both as stand-alone businesses and as they enable more consumers to access more services on the Alibaba platform.”

Wu said its Alibaba Cloud Computing subsidiary was “close to break even point” after posting US$3 billion yuan in revenue in the fiscal year to March.