A consensus was reached during the G20 summit over the weekend, and the pressure to escalate the trade war temporarily eased. As a leader in cross-border exports, the company achieved good improvements in human efficiency and customer experience in the first half of the year through fine adjustments to four major modules, including logistics/supply chain/technology/big data applications. Under the guarantee of systematic upgrading of management and operation, the global Tesco export business achieved a GMV of over 1.4 billion yuan during the “Black Five” period this year, an increase of 45% + over the previous year, and the self-operated business performed well.
Q4 Supported by rapid growth from important nodes such as “Black Friday”, it is expected that the high growth trend during the peak season will continue, and with the steady advancement of the supplier delivery system and the strengthening of account management, cash flow and inventory optimization results are expected to continue. Excluding the amortization of equity incentive expenses for the fifth round, net profit for the full year is expected to increase 60% + year over year (comparable increase of 45% +). Next year, the company will further strengthen the development of core competitiveness such as platformization, branding, and localization on the basis of ensuring refined operations, stabilizing cash flow backflow trends, and inventory control capabilities.
The current market value is 18.6 billion, corresponding to 18PE15X/19PE11X. The valuation is not high, and the bottom can be a long-term layout.
The US “Black Five” e-commerce sales broke records, and the global system was upgraded to ensure that the self-operated business “Black Five” achieved good growth. “Black Five” e-commerce sales in the US broke records this year, and the growth rate surpassed offline physical store sales.
According to Adobe Analytics statistics, “Black Five” e-commerce sales in the US set a record of 6.22 billion US dollars this year, an increase of 23.6% over the previous year. In the context of the rapid release of overseas e-commerce consumption, the company fully shared the dividends of overseas online traffic growth while continuing to push forward the strategic policy of refined reform. The first half of the year focused on four major modules, including logistics/supply chain/technology/big data applications, and human efficiency and customer experience were well improved. Under the guarantee of systematic upgrading of management and operation, the global export business GMV exceeded 1.4 billion yuan during the “Black Five” campaign this year, an increase of 45% + over the previous year. Among them, Gearbest and GMV of the apparel division increased 55% and 40%, respectively, in their own businesses. By category, sales of independent brands such as ZAFUL and MPOW increased 45.5% year-on-year, and mobile phones, home gardening, smart watches, menswear, and TVBOX became the top 5 best-selling categories on the company's self-operated website.
There is a strong trend of increasing the proportion of e-commerce sales on mobile devices. This year, “Black Five” mobile e-commerce shopping is growing rapidly. On “Black Friday” in the US, mobile e-commerce sales accounted for 33.5%, an increase of 29pct over the previous year; the share of “Cyber Monday” mobile sales increased to 54.3%, and the mobile GMV growth rate reached 55.6%.
Amazon's mobile orders exceeded 2 billion US dollars this year, accounting for 61% of the total on Black Friday. However, in the face of the general development trend of mobile internet, the company has continued to increase technology investment in recent years. Among its own channels, mobile terminals have achieved a certain breakthrough. In 2017, mobile revenue reached 2,408 billion yuan, accounting for 32.34% of the company's own export revenue; currently, Gearbest and clothing self-operated channels account for about 51% and 47% of mobile traffic, respectively. During the “Black Friday” period, global proprietary mobile GMV increased 115% year-on-year, accounting for 49% of self-operated sales, an increase of 17 pct compared to the same period last year.
Cross-border e-commerce business is beginning to flourish in emerging economies along the Belt and Road. Another highlight of this year's “Black Friday” online sales is the breakthrough of emerging economies along the Belt and Road. According to AliExpress statistics, with the exception of countries such as Russia, Spain, the United States, and France, which lead AliExpress's “Black Five” list, cross-border e-commerce is developing rapidly in countries along the Belt and Road, such as Poland, Turkey, and the Czech Republic, and developing countries. With the gradual implementation of the localization strategy for cross-border communication, it successfully entered emerging economies this year. Looking at the subregion, the top ten countries that accounted for sales of proprietary websites were the United States, Germany, Spain, France, Italy, the United Kingdom, Israel, Poland, Portugal, and Canada. Among them, “Black Five” sales in potential markets such as the Netherlands/Belgium/Austria/Portugal increased 68.9% year on year; sales in emerging markets such as the Philippines/India increased 470% year on year; Israel, a country along the Belt and Road, maintained the top ten sales terms, and Poland entered the top ten rankings for the first time.
Investment suggestions and profit forecasts: Starting from the data and technology side, the company's core competitiveness built at the levels of logistics system, supply chain system, private brand system, intelligent customer service, and intelligent marketing system gradually became apparent, driving the company's growth in the third quarter. Furthermore, the results of the company's refined management are gradually showing. With the steady advancement of website platformization, localization and supplier delivery systems, it is expected that cash flow and inventory optimization results will be maintained. As the Q4 industry gradually entered the peak sales season, the company's rapid growth momentum was good. Beginning in October, the GMV growth rate of the company's main electronics and clothing website increased. Sales also achieved impressive results during the “Black Five” period. The global self-operated channel GMV increased by more than 45%. Excluding the amortization of equity incentive expenses for the fifth round, net profit for the full year is expected to reach $1.2+ billion, an increase of 60-70% over the previous year (a comparable increase of 45-50%).
Next year, the company will further strengthen the construction of core competitiveness such as platformization, branding, and localization on the basis of ensuring refined operations, stabilizing cash flow return trends and inventory control capabilities. Furthermore, considering that Xu Jiadong, chairman of Global Tesco, is already in charge of the listed company Shuai Yin, and the transfer of controlling rights is expected to be successfully completed within the year. We believe that the growth dividends of the cross-border e-commerce industry still exist. As a leader in the cross-border e-commerce field, the company's forward-looking thinking of refinement and integration is expected to further consolidate its leading strength and establish competitive barriers during this period of intensification of industry competition.
Maintaining the 2018-2020 EPS forecast of 0.78 yuan, 1.09 yuan, and 1.50 yuan respectively, the company's current market value is 18.6 billion yuan, corresponding to 18PE15X/19PE11X. The valuation is not high. In the short term, in the context of the intensification of the Sino-US trade war and weakening concerns, the valuation is expected to be repaired. The bottom can be a long-term layout, maintaining the “Highly Recommended - A” investment rating.
Risk warning: industry policy risks exceed expectations; new business development such as imports falls short of expectations; pledge risk.