From a payment platform to a one-stop service platform, the network effect advantage is significant. Ant Group first started with the payment business, but its current service scope has gone beyond payment to become a one-stop service platform that includes many scenarios such as digital payments, digital life, and digital finance, providing inclusive financial services to more than 1 billion users and 80 million merchants. Ant Group's business model is to provide infrastructure support for digital life and digital finance through digital payments, maintain customer stickiness and activity through the two major scenarios of digital life and digital finance, and ultimately monetize through a digital fintech platform.
Ant Group has a large number of users and covers a large number of life scenarios and financial scenarios, forming a bilateral network effect with remarkable competitive advantages. Currently, Ant Group mainly monetizes through digital fintech platforms, but considering its massive number of users, the possibility of other monetization methods will not be ruled out in the future.
The combination of a huge user base and broad market space has brought about the company's growth. Ant Group's current revenue mainly comes from digital payments, merchant services, and digital fintech platforms (including microfinance technology platforms, financial technology platforms, and insurance technology platforms). The digital payment market where it is located has entered a period of steady growth; the microfinance market for the long-tail customer group where it is located still has a lot of room for growth, while the financial management and insurance agency market space is even wider. Ant Group's monthly active users reached 770 million at the end of June 2020. The traffic advantage is remarkable, and there is still room for further improvement. The combination of a huge user base and a broad market space has brought about the company's growth.
On the other hand, after the digital payment market enters a period of steady growth, the competitive pattern will stabilize. We believe this will help reduce the company's sales expenses ratio; in the long run, the maturing of the digital payment market means that the revenue share of this sector will also gradually decrease, leading to a gradual increase in the company's gross margin. This will all enhance its long-term profitability.
Investment advice
Combining absolute valuation and relative valuation, we believe that the company's stock value corresponds to 40 to 60 times the dynamic PE in 2020, corresponding to the company's overall value of 1.7 to 2.5 trillion yuan. Ant Group has a large number of active users and rich application scenarios. Its business model is unique, competitive advantage is remarkable, and its performance is growing rapidly. Investors are advised to pay active attention.
Risk warning
Includes other aspects of risk such as valuation, profit forecasting, and equity assumptions