Overseas Chinese Equities, Aequitas Research

Ming Lu

A veteran with 19-year experience in equity research.

Geographical coverage:
* Companies operating in China, but listed in Hong Kong and the U.S.
* Previously China A-share (listed in mainland China).

Equity sector coverage:
* Chinese App / Internet-based consumption in China, e.g., Alibaba, Tencent, etc.
* Previously covered education, transportation, telecom, power, bank, advertisement, hotel, etc.

Research methods:
* Generally bottom-up.
* Talk to related people on the ground.  Talk to readers and independent writers for analyzing a news portal.  Talk to parents and teachers for analyzing a tutoring school. 
* Visit stores and show photos as evidence in notes.
* Do technical analysis when finding a short-seller attacking an equity.

Languages:
* English
* Mandarin Chinese (Official language of China)
* Shanghainese (Language of Shanghai, the most developed city in China)
* Cantonese (Language of Hong Kong and Canton Province, one of the most developed provinces in China)

Overseas Chinese Equities

Alibaba (BABA) – Kicking Competitors Out of Cloud Computing with a Stable Negative Margin

BABA Sacrificed Margin to Acquire Customers in FY2018

A Visit to Alibaba’s “New Retail” – Physical Store Hema

Alibaba Group Holdings Limited (NYSE: BABA) C4Q17: Time to Look for the Next Driver

'Alibaba-Adjacent' Investing Really Didn't Work Over the Last Year

BABA FYQ3: 'Core Commerce' & CaiNiao Decelerate, Guides to Slower FYQ4, Negative for Express Parcels

Equity Bottom-Up

Alibaba Group Holding  / Equity Bottom-Up

<ul class=""><li>Operating margin of main businesses declined, but Alibaba made it up with shrinking losses in minor businesses.</li><li>We believe that Alibaba consolidates investees which can raise revenues growth and margins, but accounts for weak investees in “other income, net”.</li><li>We also believe the unnecessarily aggressive expansion pulls down margins.</li><li>P/E band suggests an upside of 12% and a target price of USD201, but we rate it “Hold”.</li></ul>

Operating margin of main businesses declined, but Alibaba made it up with shrinking losses in minor businesses.We believe that Alibaba consolidates investees which can raise revenues growth and margins, but accounts for weak investees in “other income, net”.We also believe the unnecessarily aggressive expansion pulls down margins.P/E band suggests an upside of 12% and a target price of USD201, but we rate it “Hold”.

Alibaba (BABA) – An Accounting Purpose in Venture Capital Investment