Alibaba throws down the gauntlet for fiscal 2022

May 14, 2021

HONG KONG -- S&P Global Ratings said today that competition in China's e-commerce is intensifying considerably. Notably, the Alibaba Group plans to invest all incremental profits in the fiscal year ending March 31, 2022, into the core strategic areas of domestic consumption, globalisation, and advanced technologies.

"Although we now expect flattish profit growth in fiscal 2022, such investment spending should bolster Alibaba's longer-term competitiveness, and is therefore neutral for our rating on the company (A+/Stable/--)," S&P says.

"It' is noteworthy that management is focussing on its new retail segment, particularly the community marketplace."

S&P says it believes Alibaba will significantly increase investments across various fronts, including logistics, supply chain, local services (last-mile delivery), and its community marketplace platforms such as Taobao Grocery, Freshippo, and Sun Art.

"We forecast flattish EBITDA growth for Alibaba in fiscal 2022 despite revenue growth of 25%-35% during the year," S&P says.

"This implies a five-percentage point drop in profit margins and an incremental investment spending of more than RMB20 billion.

"Such spending is in line with online grocer Meituan's in community group buying. We forecast negative EBITDA of RMB15 billion-RMB20 billion in 2021 for Meituan. (ATI).