Equity Analyst, LightStream Research

Oshadhi Kumarasiri

An equity research analyst with over 7 years of experience in multiple sectors. Previously worked for one of the world's largest asset managers with about USD2.5trn in AUM, covering small and micro-cap companies in the consumer sphere across Europe and developed Asia. Also experienced in covering multiple industries including banking, insurance and asset management, retail, tech, telco and REIT.

Equity Analyst

Coupang IPO: Initial Thoughts on Rumoured $50.0bn Valuation

Coupang IPO: Significantly Overvalued As a LT Investment & Too Risky To Bet On The Short Term Upside

Coupang IPO: Not Worth Subscribing at Rumoured 50.0bn Valuation

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a>, the largest e-commerce company in South Korea with $12.0bn in annual revenue, filed for an NYSE IPO under the ticker “CPNG” with a placeholder value of $1.0bn.Coupang is fundamentally different from other e-commerce companies as it generates around 92.2% of the total revenue from the owned inventory segment. The company’s COGS is over 83% of revenue compared to marketplace players like <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>’s 57% and <a href="https://www.smartkarma.com/entities/pinduoduo-inc" target="_blank" data-smartkarma-citation="entities:27250:1" rel="noopener">Pinduoduo (PDD US)</a>’s 22%. Inherently, Coupang is incapable of generating gross margins comparable with e-commerce marketspace players due to its dependence on own inventory sales.Around 29% of South Korea’s total population is active Coupang customers, yet the company made an operating loss of $528m in 2020. Moreover, the company’s revenue increased 91% YoY in 2020 to $12.0bn driven by 25.9% YoY and 59% YoY active customer growth and revenue per active customer growth respectively. However, 2020 operating loss declined just $116m. It is an indication that Coupang’s margin expansion potential is greatly exhausted.There is significant revenue growth potential in Coupang. However, we don’t expect revenue growth to translate into profits. Thus, the $50.0bn valuation suggested by various media reports seems extremely optimistic.

Coupang (CPNG US), the largest e-commerce company in South Korea with $12.0bn in annual revenue, filed for an NYSE IPO under the ticker “CPNG” with a placeholder value of $1.0bn.Coupang is fundamentally different from other e-commerce companies as it generates around 92.2% of the total revenue from the owned inventory segment. The company’s COGS is over 83% of revenue compared to marketplace players like Alibaba Group (BABA US)’s 57% and Pinduoduo (PDD US)’s 22%. Inherently, Coupang is incapable of generating gross margins comparable with e-commerce marketspace players due to its dependence on own inventory sales.Around 29% of South Korea’s total population is active Coupang customers, yet the company made an operating loss of $528m in 2020. Moreover, the company’s revenue increased 91% YoY in 2020 to $12.0bn driven by 25.9% YoY and 59% YoY active customer growth and revenue per active customer growth respectively. However, 2020 operating loss declined just $116m. It is an indication that Coupang’s margin expansion potential is greatly exhausted.There is significant revenue growth potential in Coupang. However, we don’t expect revenue growth to translate into profits. Thus, the $50.0bn valuation suggested by various media reports seems extremely optimistic.

Coupang

Coupang IPO: Lacks Margin Upside