GOTO - Improved, yet faces tailwinds
Wednesday, 6 Sept 2023
GOTO: Improved, yet faces tailwinds
(Maintain BUY; TP: IDR143)
E-commerce segment has shown intensifying competition especially with growing presence of Tiktok Shop which combines social media and shopping experience that is responded by Shopee Live shopping feature. We witness Shopee's efforts to promote Live Shopping feature started to gain grounds, which provides more incentive for live buyers, such as a 50% discount plus free delivery, cashback and extra coins.
GOTO reiterates its laser-focuses on means to speed up profitability with core strategy by enhancing cost efficiency, expanding budget customer base in all business segments and streamlining its operational as it plans to exit non-core business.
Gojek's Budget Mode (Mode Hemat) is expected to result in more efficient operational on more streamlined order process based on drivers' proximity and dynamic pricing for GoFood both are banked on AI capability.
GoPay standalone app is aimed to address potential customers outside the ecosystem. Meanwhile, GOTO is to further strengthen strategic partnership with Bank Jago (ARTO) to optimize prudence, while planning to expand its cash loan through Gojek apps.
Despite challenging competition landscape, GOTO's performance has shown an improvement in 2Q23 on the back of its continuous strategy on cost efficiency. This was evidenced by narrowed Adj. EBITDA loss to 0.8% of GTV in 2Q23, which in our view, is aligned with management's target to achieve EBITDA break-even by the end of 2023.
We maintain BUY call with lower target price of IDR143 (previously: IDR150/share) as we make an adjustment on lower e-commerce GTV on the back of tailwinds from normalization and stiff competition from other e-commerce and increasing presence of social commerce.
Devi Harjoto – KBVS Research