Analysis of the Impact of Hema's Profitable Expansion on the Valuation of Alibaba's New Retail Business

Now let me analyze in detail the impact of Hema’s profit realization and accelerated expansion on the valuation of Alibaba’s new retail business.

Based on the latest disclosed information and market data [1], Hema achieved a key breakthrough in fiscal year 2025:

• GMV reached RMB 75 billion
  in fiscal year 2025
• First full-year adjusted EBITA profit realized
  , ending seven years of losses
• Net profit margin of 2.5%
  (higher than Dingdong Maicai’s 1.37%)
• Revenue grew by over 40% year-on-year

• Deduplicated APP users reached 60.97 million
  , up 10.9% year-on-year
• Membership exceeded 40 million
  , with annual consumption frequency of 24 times (3x that of regular users)
• Ranked among the top 3 in China’s top 100 supermarkets
  , second only to Walmart China and RT-Mart’s parent company

According to market data, Hema’s valuation

1. Profit Model Validation
   : Shifted from “burning money for scale” to “sustainable profitability”, business model verified
2. High PE Valuation
   : 35x PE higher than traditional retail, reflecting market recognition of its growth potential and tech attributes
3. Capital Support
   : Attracted long-term funds like Goldman Sachs and Temasek to increase holdings [1]

• Current Stock Price
  : $146.58
• Market Cap
  : $339.91B (≈ RMB 2.4 trillion)
• 2025 Stock Price Increase
  : +73.69%
• P/E Ratio
  : 19.27x

Assuming Hema’s valuation of RMB 80 billion, impact on Alibaba:

1. Direct Share
   : Hema’s 80 billion valuation accounts for
   3.3%
   of Alibaba’s 2.4 trillion market cap

2. Strategic Value
   : Although the direct share is small, as the core testbed for the new retail strategy, Hema’s success verifies Alibaba’s capabilities in
   instant retail
   and
   online-offline integration

3. Synergies
   : Hema’s success can:
   • Boost the overall valuation of Alibaba’s local life services business
   • Provide supply chain support for businesses like Taobao Flash Sale and Ele.me
   • Enhance Alibaba’s competitiveness in fresh food categories

• Past
  : Hema was long-term loss-making, regarded as the “No.1 New Retail Project” but also a financial burden
• Now
  : After achieving profitability, it has transformed from a “money-burning department” to a “value creator”

1. Instant Retail GMV Target
   : Alibaba plans to push instant retail GMV to
   RMB 1 trillion
   within three years [2], Hema as the core fulfillment node, its 75 billion GMV is an important foundation

2. Successful Business Focus
   : Shut down inefficient formats like X Membership Stores, focused on “Hema Fresh + Chaohesuan NB” dual-drive, proving the correctness of strategic contraction

3. Sinking Market Breakthrough
   : Chaohesuan NB’s GMV share in second/third-tier and county-level markets rose to 12%, opening up incremental space for Alibaba

According to company overview data [0], Alibaba gained significant investor recognition in 2025:

• Analyst Consensus Rating
  : Buy (89.5% of analysts gave buy ratings)
• Median Target Price
  : $190.00 (29.6% upside from current price)
• Hedge Fund Holdings
  : Increased from 101 in Q3 2024 to 130 in Q3 2025

1. Validate New Retail Model
   : Proves Alibaba can profit in offline retail, unlike many failed fresh food e-commerce platforms
2. Boost Segment Valuation
   : Although Hema’s scale is smaller than Alibaba Cloud or Taobao Tmall, its high growth (40% year-on-year) and profitability help lift overall valuation
3. Release Synergy Value
   : Hema’s supply chain capabilities and membership system can generate synergies with other Alibaba businesses

Although Hema has achieved a profit breakthrough, it still faces challenges:

1. Profit Sustainability
   : Current 2.5% net profit margin is still low; need to continuously optimize cost structure

2. Intensified Competition
   :
   • Meituan’s “Xiaoxiang Supermarket” is growing rapidly
   • Dingdong Maicai also achieved full-year profit in 2024 (1.37% net margin)
   • Benchmark enterprises like Sam’s Club and Pangdonglai have deep roots for years

3. Balance Between Expansion and Profitability
   : Hema plans to enter 40 new cities, Chaohesuan NB will open over 200 new stores; expansion may push up costs again

• Hema’s valuation increased from RMB40b to 80b, contributing about
  RMB4-8 billion
  to Alibaba’s market cap
• Mainly reflected in
  higher valuation of new retail segment
  and
  enhanced investor confidence

• If Hema achieves the
  100 billion GMV target
  , valuation is expected to rise further to
  RMB100-120 billion
• Through deep integration with Taobao Flash Sale and Ele.me, synergies may create additional value

• As a successful sample of Alibaba’s “digitalization of physical retail”, Hema can provide experience for Alibaba’s exploration in other retail areas
• Occupy a favorable position in the instant retail track (expected CAGR of30.8% from2025-2030 [3])

Hema’s profit realization and accelerated expansion have positive impacts on the valuation of Alibaba’s new retail business mainly reflected in:

1. Direct Valuation Contribution
   : Hema’s own valuation doubled from RMB40b to80b
2. Strategic Value Validation
   : Proves new retail model is feasible, increasing market’s overall valuation of Alibaba’s offline business
3. Synergy Release
   : Provides core capability support for Alibaba’s local life ecosystem
4. Investor Confidence Boost
   : Transformed from “money-burning department” to “value creator”, enhancing market confidence

Although Hema currently accounts for only about3.3% of Alibaba’s market cap, its strategic significance far exceeds its financial share. It is a key asset for Alibaba to compete against Meituan and JD.com in the instant retail field, and an important part of Alibaba’s “retail + tech” strategy.

For Alibaba, Hema’s profit breakthrough is not only a financial improvement of a business, but also an important victory in its long-term strategic layout. As Alibaba plans to continue increasing investment in instant retail in the next few years, targeting to push instant retail GMV to1 trillion within three years [2], Hema will become the core engine to achieve this goal.

[0] Jinling API Data - Alibaba (BABA) real-time quotes, company overview, historical price data
[1] Super Finance - “2025 is Hema’s Profit Breakthrough Retail Revolution, Value Benchmark of Instant Retail” (https://www.ichaoqi.com/zhuanlan/2025/1231/79859.html)
[2] Yahoo Finance - “Alibaba: Is Now the Time to Buy as AI Revenue Climbs?” (https://hk.finance.yahoo.com/news/阿里巴巴-ai收入攀升現在是買進的時機嗎-063606376.html)
[3] 36Kr - “Regardless of Whether JD Buys Dingdong, Taobao Should Internalize Hema” (https://m.36kr.com/p/3617816468943365)
[4] BusinessWire - “AI in Food Retail and E-commerce Global Market Research Report 2025” (http://www.businesswire.com/news/home/20251231201352/en/)