In today’s briefing:
- NYKAA IN | Nykaa Fashion Appears to Be Mismanaged and in Need of a Change
- Pinduoduo (PDD US): Don’t Fight with PDD
- Higher P/E Is Driver for This Stock Rally. Profit Growth Is Necessary for Further Stock Rally
- OGO: Light Q2 Revenue but Profitability Largely Improving
- [PDD Holdings (PDD US, BUY, TP US$107)]: Raise TP for GMV, Take Rate, Temu and Kuaituantuan
NYKAA IN | Nykaa Fashion Appears to Be Mismanaged and in Need of a Change
- As part of our Narrative and Numbers themed Annual Report insights, we shift our focus to FSN E-Commerce Ventures (Nykaa) (NYKAA IN).
- We focus on Nykaa Fashion due to its financial significance in spite of not being a material subsidiary warranting the need for board review on materiality policy.
- Notable issues demanding scrutiny include (1) Declining Financials, (2) Inconsistent Reporting, (3) Misleading Narrative, and (4) Elevated Executive Compensation.
Pinduoduo (PDD US): Don’t Fight with PDD
- PDD reported blowout 2Q results with bottom line beating consensus by 40% thanks to stronger domestic marketplaces business, narrower losses incurred by TEMU and higher other income.
- 2Q results cleared much of our concern around PDD’s bottom line growth and we now see 2Q as the low point of earnings growth in FY23.
- We believe the company will report $9 billion net profit for FY23 and expect rounds of earnings revision by the street will further lift share price. US $120 price target.
Higher P/E Is Driver for This Stock Rally. Profit Growth Is Necessary for Further Stock Rally
- Despite disclosing “improvement measures,” many companies have yet to see their stock prices rise sufficiently, which is one reason why an increasing number of companies announce enhanced shareholder returns.
- 2003 and 2013 were the starting point for monetary easing and excess liquidity helped raise P/B. Whether BOJ will head for the exit or continue easing is a major factor.
- Since this stock price rally was brought about by an increase in P/E multiples, further stock price appreciation will require continued profit growth, i.e., an increase in ROE.
OGO: Light Q2 Revenue but Profitability Largely Improving
- Organto reported Q2 financial results that missed our estimates on revenue but beat our estimates on gross margin and adjusted EBITDA.
- Yesterday evening, Organto Foods (OGO:TSXV) reported Q2/23 financial results that were softer than our expectations on revenue but beat our estimates on profitability metrics.
- Gross margin for the quarter came in at 9.0% compared to our estimate of 8.0% and 4.1% in Q2 last year.
[PDD Holdings (PDD US, BUY, TP US$107)]: Raise TP for GMV, Take Rate, Temu and Kuaituantuan
- PDD reported CY2Q23 top-line and non-GAAP net profit 28% and 58% vs. our est., and 21% and 44% vs. cons., respectively.
- We raised our 2H23 forecasts for PDD because: 1) GMV growth hasn’t been significantly impacted by the current competitive landscape; 2) take rate could maintain a high level due to
- Continuous optimization of ad products; and 3) new businesses such as Temu and Kuaituantuan (快团团) have fair growth. We maintain BUY and raise our TP to US$ 107.
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