Earnings Alert: 1H22 earnings beat with 33% growth and raising EBITDA margin guidance
- Revenue increased by 27% y-o-y to HK$1.9bn in 1H22
- Net profit grew by 33%, above market expectations due to higher operating efficiency
- Revised up FY22-23F earnings by 112% and 93% after incorporating stronger 1H22 earnings and higher EBITDA margin assumption
- Maintain BUY on a TP of HK$13.7 based on 3x FY23F P/S
1H22 results highlights
– Revenue increased by 26.6% y-o-y to HK$1,922m, largely in line with market expectations
– Net profit grew by 33% to HK$127.8m, above market expectations thanks to improving operating efficiency and economies of scale with higher GMV
– Adjusted EBITDA increased 35% to HK$195.6m in 1H22, above market expectations, achieving 5.4% of GMV. This represents 5.4% of GMV, ahead of original guidance of 2.5% of GMV.
– In terms of operating metrics, GMV grew by 37.7% to HK$4,186m; among them 70% of GMV from the third party merchants. Average daily orders increased 27% to 46.4k in June 2022; number of unique customers increased by 24% to 1.1m in 1H22.
– Operating expenses as a percentage of GMV decreased from 21.2% in 1H2021 to 19.9% in 1H2022.
– The company announced an interim dividend of HK8 cents per share, same level as last year.
– Note that the company gave 2022 GMV guidance of HK$8-8.5bn and adjusted EBITDA of c.HK$160-213m for FY22 in Mar 2022. It has updated its targets as follows: (1) GMV of HK$8bn, representing 12% y-o-y growth for 2H22 (2) adjusted EBITDA as a % of GMV at 4.5%-5% (vs 2%-2.5% previously), implying adjusted EBITDA of c.HK$120-160m in 2H22, above market expectations.
-The guidance for multimedia advertising income remained unchanged at c.HK$120m and gross margin and take rate targets at 23.4% were maintained for FY22.
– The company remains confident to achieve HK$12-15bn GMV by FY25 supported by wider product offering and improved fulfillment capacities.
Our View
– The strong revenue growth in 1H22 was driven by robust online shopping demand under the fifth wave of Covid. We believe that the company can maintain a steady and healthy growth into 2H22.
– As for its technology business, management remains confident to launch its first Fully Automated Retail Store and System by end of 2022 in the UK. This represents longer-term growth potential.
– Given the normalisation of consumption demand and online retail sales growth in 2H22, we revised down revenue by 4% and 3% for FY22F and FY23F. After incorporating improving operating efficiency in 1H22 and higher EBITDA margin assumption, we now forecast FY22 and FY23 earnings at HK$187m and HK$199m respectively, 112% and 93% higher than our previous projection. This implies HK$60m net profit or 3% net margin for 2H22 (vs 2H20’s 5%), which should be achievable in our view. We believe HKTV will further expand its business scale with enhanced fulfillment capabilities and wider product offerings. We expect revenue to grow by 17%/14% /13% for FY22F/ FY23F/ FY24F. Our adjusted EBITDA forecasts are HK$312m/ HK$347m/ HK$427m for FY22F/ FY23F/FY24F.
– HKTV remains the key beneficiary of increasing demand for online shopping in Hong Kong. Maintain BUY with higher TP of HK$13.7 based on 3x FY23F P/S, largely in line with historical range of leading e-commerce players.
