Achieved positive adj. EBITDA in 3Q23
- Grab achieved its first quarter of positive group adj. EBITDA in 3Q23 with continued on-demand GMV growth and margin expansion across segments.
- Grab believes that it can sustain healthy GMV growth momentum into 4Q23F, and lifted its revenue and adj. EBITDA guidance for FY23F.
- Grab remains committed to sustainable growth, with key focus on improving affordability of its services to grow total addressable market. Reiterate Add.
3Q23: First set of positive group adj. EBITDA
With Grab’s continued on-demand GMV growth in 3Q23 to US$4.0bn (+3% qoq, +14% yoy) and fewer incentives, revenue of US$615m (+8% qoq, +61% yoy) and adj. EBITDA of US$29m came in ahead of expectations (page 2 for details). 9M23 GAAP PATMI made up 82%/87% of our/Bloomberg consensus full-year loss forecasts. Key positives in 3Q23 include: 1) continued strong growth momentum for mobility GMV at 7% qoq or 30% yoy, 2) positive adj. EBITDA growth across all four of its business segments; deliveries segment margin reached a record high of 3.4%, and 3) Grab raised FY23F revenue and adj. EBITDA guidance on strong performance YTD.
Sustaining healthy momentum into 4Q23F
Grab remains optimistic of sustaining its growth trajectory and guided for sequential GMV growth in both the mobility and deliveries segments in 4Q23F while keeping margins stable. A key emphasis is driving penetration of affordable services to further expand Grab’s total addressable market. Despite the growing penetration of its affordable services over the past year, Grab was able to keep overall margins stable by ensuring product differentiation and continued optimisation of its price-laddering strategy. For example, Grab’s “Saver” food delivery option will include order batching, with more advertisements for consumers to compensate for the lower delivery charges.
Committed to sustainable profitable growth
Grab committed to striking a healthy balance between growth and profitability, and strives to achieve a steady pace of adj. EBITDA growth in quarters ahead as it works towards its next milestone of achieving positive free cash flow. Beyond driving GMV growth of its on-demand services, Grab continues to invest in its fintech business (launch of digital banks in Malaysia and Indonesia remains on track for FY23F) and advertising business (deeper penetration via a wider rollout of its self-serve platform). We forecast Grab to achieve positive free cash flow by FY24F and GAAP profitability by FY25F.
Reiterate Add
Reiterate Add and SOP-based TP of US$4.50, as Grab continues to strive for sustainable and profitable growth beyond breaking even at the adj. EBITDA level, as it rides on sector tailwinds. Re-rating catalysts include stronger mobility GMV on the back of a recovery in tourism, and losses narrowing at a faster pace. Downside risks include macro headwinds dampening demand for Grab’s services, leading to weaker GMV, and intensifying competition leading to near-term margin squeeze.
