Algo, engagement & op. leverage led to huge earnings beat    Top-line beatwas mainly driven by strengthin:1) China commerce retail (57% YoY vs. CMS 48%), driven by new user and personalization which led to higher conversion rate and click thru rate, and 2) customer mgt revenue(previously called online mktg services), which enjoyed65% YoYgrowthvs. CMS 46%. This concurs with our earlier comment that we believe “incremental top-line surprise in FY18E will be coming from Online Marketing Services”, in our Jul 11 anchor report: Sky is the limit for China’s almighty data commerce giant.On earnings, we attribute the huge beat to 1) operating leverage, 2) margin rate, and 3) participation in 618 promotion season.    Cloudnearbreakeven; Lazada enjoyedaccelerated growth    Cloud(5% of revenue):paying customers reached key milestone of 1mn. Ali’s top priority is still toexpand market leadership. Revenue jumped 96% YoY (FY4Q17 103% YoY). Adjusted EBITA margin improved from -8% in FY4Q17 to -4% in FY1Q18 on economies of scale.    International commerce retail(6%): revenue accelerated to RMB2.6bn, up 136% YoY, with stakes in Lazada increased from 51% to 83%.    Digital media and entertainment(8%):revenue rose 30% YoY, 4% QoQ to RMB4,081mn due to increase in revenue from mobile value-added services provided by UCWeb, such as news feeds and mobile search. Adjusted EBITA margin is-43%, vs. -32% in FY1Q17. It will continue to invest in content, user acquisition and infrastructure.    BABA –still our conviction BUY in Chinainternet/eC space    BABA’s growth catalysts: 1) core commerce: accelerated monetization, 2) cloud, and 3) LT capability in unlocking value of data/AI. We lift our TP from US$190 to US$220 based on SOTP, implying 35x FY19E non-GAAP earnings. The company is trading at 26x FY19E (Mar) P/E or 1.0x FY19E PEG (based on FY20 EPS growth), at discount to FY18E PEG of Tencent (700 HK, BUY) 1.6x, Amazon (AMZN US) 2.3x, Baidu (BIDU US) 1.1x, JD (JD US, BUY) 1.1x.

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