Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

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Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Equity Bottom-Up

Coupang's 1Q results are a disappointment, and it is a well-expected outcome. Total net revenues increased 74% year over year. Gross profit was $733M in the first quarter, a 70% increase from last year. But the operating loss has also deepened by 180% on a yearly span.<table class="table table-striped">
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<td data-sheets-value='{"1":2,"2":"(in thousands, except net revenues per Active Customer)"}'>First Quarter 2021 Results (US$M)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2021}'>1Q 2021</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2020}'>1Q 2020</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"% Y/Y Change"}'>% Y/Y Change</td>
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<tr>
<td data-sheets-value='{"1":2,"2":"Total net revenues"}'>Total net revenues</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4206860}' data-sheets-numberformat='{"1":4,"2":"\"$\"#,##0","3":1}'>4,206.9</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2413259}' data-sheets-numberformat='{"1":4,"2":"\"$\"#,##0","3":1}'>2,413.3</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.74}' data-sheets-numberformat='{"1":3,"2":"0%","3":1}'>74.0%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Gross profit"}'>Gross profit</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":732506}' data-sheets-numberformat='{"1":4,"2":"\"$\"#,##0","3":1}'>732.5</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":430295}' data-sheets-numberformat='{"1":4,"2":"\"$\"#,##0","3":1}'>430.3</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7}' data-sheets-numberformat='{"1":3,"2":"0%","3":1}'>70.0%</td>
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<td data-sheets-value='{"1":2,"2":"Net loss"}'>Net loss</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-295033}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>-295.0</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-105353}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>-105.4</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.8}' data-sheets-numberformat='{"1":3,"2":"0%","3":1}'>180.0%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Adjusted EBITDA1"}'>Adjusted EBITDA</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-132966}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>-133.0</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-41845}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}'>-41.8</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}'>-</td>
</tr>
<tr><td colspan="4" data-sheets-value='{"1":2,"2":"Source: Coupang"}'>Source: Coupang</td></tr>
</tbody>
</table>Coupang's 74% YoY sales growth easily tops the local direct peers. Naver's commerce division posted a 40.3% YoY sales growth in the first quarter. SKT's 11st achieved only a 1.6% sales growth from the same quarter of last year. So, we know Coupang is still aggressive.But the problem is whether it could keep the cost under control. And apparently, it hasn't. Adjusted EBITDA loss was $133M compared to a $42M loss in the prior year’s quarter. Coupang acknowledged that the higher loss was driven by an increase in operating, general, and administrative costs. What are these costs? Yes, they are mainly marketing expenses. In this first quarter, the SG&amp;A accounts for 20.9% of total net revenues, compared to 19.8% in the prior year.

Coupang's 1Q results are a disappointment, and it is a well-expected outcome. Total net revenues increased 74% year over year. Gross profit was $733M in the first quarter, a 70% increase from last year. But the operating loss has also deepened by 180% on a yearly span.








First Quarter 2021 Results (US$M)
1Q 2021
1Q 2020
% Y/Y Change


Total net revenues
4,206.9
2,413.3
74.0%


Gross profit
732.5
430.3
70.0%


Net loss
-295.0
-105.4
180.0%


Adjusted EBITDA
-133.0
-41.8
-

Source: Coupang

Coupang's 74% YoY sales growth easily tops the local direct peers. Naver's commerce division posted a 40.3% YoY sales growth in the first quarter. SKT's 11st achieved only a 1.6% sales growth from the same quarter of last year. So, we know Coupang is still aggressive.But the problem is whether it could keep the cost under control. And apparently, it hasn't. Adjusted EBITDA loss was $133M compared to a $42M loss in the prior year’s quarter. Coupang acknowledged that the higher loss was driven by an increase in operating, general, and administrative costs. What are these costs? Yes, they are mainly marketing expenses. In this first quarter, the SG&amp;A accounts for 20.9% of total net revenues, compared to 19.8% in the prior year.

Coupang's Anticipated Disappointment, but 1P's Trouble Makes Us More Worried