why alibaba?

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Arijeet|Akash|Aman|Dhruv| Konark|Monica

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Page 1: Why Alibaba?

Arijeet|Akash|Aman|Dhruv|Konark|Monica

Page 2: Why Alibaba?

WHY ALIBABA? Only big Non-U.S. E-commerce giant Fastest growing e-commerce Company in the world One of the biggest innovators in cutting cost. Competitors Amazon, eBay

Page 3: Why Alibaba?

80%Of China’s online

market is dominated by Alibaba

WHY ALIBABA?

Page 4: Why Alibaba?
Page 5: Why Alibaba?

VS VS • Founded in 1995, Campbell,

California, United States

• Released IPO at a valuation of USD

$63 Million in 1998

• Online platform for sale of goods

and services for and by individuals

• PayPal, Skype, Craiglist are

subsidiaries.

• Founded in 1999, Hangzhou,

China

• Released IPO in September

2014 in US at a valuation of

USD $21.8 Billion

• Acts as middleman between

buyers and sellers through its

network of websites• Taobao.com, Tmall, Alipay

• No Inventory

• Founded in 1994, Bellevue,

Washington, United States• Released IPO at a valuation of USD

$54 Million in May, 1997

• Indulges in both direct selling of goods

and provides online platform for other

retailers to sell products

• Kindle, e-book are other sources of

revenues

• Has its large network of warehouses

for inventory

Page 6: Why Alibaba?

*sources NASDAQ and NYSE

Page 7: Why Alibaba?

ProfitabilityAmazon Ebay Alibaba

USD million $Dec'14 Dec'13 Dec'12 Dec'14 Dec'13 Dec'12 march'14 March'13 March'12

Gross Profit 26236 20271 15122 12170 11011 9856 39135 24798 13471Net Sales 88988 74452 61093 17902 16047 14072 52504 34517 20025Gross Profit Margin 29.48% 27.23% 24.75% 67.98% 68.62% 70.04% 74.54% 71.84% 67.27%

Income From Operations 178 745 676 3514 3371 2888 24801 10506 4944Operating Profit Margin 0.20% 1.00% 1.11% 19.63% 21.01% 20.52% 47.24% 30.44% 24.69%

Net Income -241 274 -39 46 2856 2609 23315 8532 4228Total Stock holders equity 10741 9746 8192 19906 23647 20865 39739 10509 31518ROE -2.24% 2.81% -0.48% 0.23% 12.08% 12.50% 58.67% 81.19% 13.41%

Total Assets 54505 40159 32555 45132 41488 37074 111549 63786 47210ROA -0.44% 0.68% -0.12% 0.10% 6.88% 7.04% 20.90% 13.38% 8.96%

Interest 210 141 92 0 0 0 358.53 250.28 10.66EBIT 99 647 636 3531 3466 3084 5658 4663 1880Degree of Financial leverage -0.89 1.28 1.17 1.00 1.00 1.00 1.01 1.02 1.00

% Change in EBIT -84.70% 1.73% 1.88% 12.39% 21.34% 148.03%% Change in Sales 19.52% 21.87% 11.56% 14.03% 52.11% 72.37%Degree of Operating Leverage -4.34 0.08 0.16 0.88 0.41 2.05 Combined Leverage 3.87 0.10 0.16 0.88 0.42 2.10

COMPARING PROFITABILITY AND LEVERAGES:

Page 8: Why Alibaba?

2014 2013 2012

74.5

4

71.8

4

67.2

7

67.9

8

68.6

2

70.0

4

29.4

8

27.2

3

24.7

5

GROSS PROFIT MARGIN

Alibaba Ebay Amazon

2012 2013 20140

10

20

30

40

50

Operating Profit Margin

Alibaba Ebay Amazon

Page 9: Why Alibaba?

FINDINGS:

• Alibaba have higher gross profit margins, operating profit margin , ROA and ROE, thus it is more profitable than EBay an Amazon.

• It is primarily due to high profits they make by their business. • The interesting fact is that Amazon net revenue is more than Alibaba’s but still their

profit margins are low.• If we see leverage, then also Alibaba is the least risky company among the three.• By 2017 Alibaba would take over Amazon in revenue too.

22.82%

15.45%

56.54%

Page 10: Why Alibaba?

INVENTORY TURNOVER

AVERAGE COLLECTION AND PAYMENT PERIOD

OPERATING EXPENSE RATIOCost Efficiency

Page 11: Why Alibaba?

2011 2012 2013 2014

10.72

10.05 10.13

9.63

AMAZON'S INVENTORY TURNOVER DAYS

INVENTORY TURNOVER

AMAZON’S AVERAGE INVENTORY TURNOVER OF 10.13

ALIBABAJUST IN TIME APPROACH NO INVENTORY POLICY

INVENTORY TURNOVER

Page 12: Why Alibaba?

AVERAGE CASH COLLECTION

DAYS80.84

AVERAGE CASH COLLECTION

DAYS21.99

AVERAGE CASH PAYMENT DAYS

19.84

AVERAGE CASH PAYMENT DAYS

103.12

2011 2012 2013 2014

6.41%

95.90%

78.23%

69.02%

2.94% 6.27% 6.96%14.03%

PERCENTAGE OF DEBT

ALIBABA AMAZON

Page 13: Why Alibaba?

2011 2012 2013 2014

0.75310861423221 0.695628241156532

0.527635989638885

0.701905411789407

0.982070428687314

0.988934902525658

0.989993552893139

0.997999730300715

0.789508782017998

0.794769755542922

0.789929581853306

0.803709082784047

ALIBABA AMAZON ebay

ALIBABA HAS LOWEST OPERATING EXPENSES THROUGHOUT THESE

OPERATING EXPENSE/ TOTAL REVENUE

LOW EXPENSE HIGH PROFIT

OPERATING EXPENSE RATIO

Page 14: Why Alibaba?

Cost effectiveness should be a priority

Good inventory

management can make

the difference

High leverage high risk

KEY LEARNINGS

Page 15: Why Alibaba?