20180525-交银国际证券-Bottom-line_beat_by_48_；_housing_better-than-expected_5页_559kb

58.com (WUBA US) 2018 Q1 Summary and Analysis

Core Content

58.com (WUBA US) reported its 1Q18 results, which exceeded expectations, driven by strong performance in both job listings and housing sectors. The company's revenue reached RMB2.47bn, up 24% YoY and 4% above the consensus. Non-GAAP EPS was RMB2.05, significantly up 181% YoY and 48% above the consensus of RMB1.38. The non-GAAP operating margin improved to 17%, up 6ppts YoY, due to lower sales and marketing spending as a percentage of total revenue. Online marketing service revenue increased by 31% YoY, attributed to the adoption of real-time bidding and other online marketing services.

Main Points

• Job Listings Growth:
  The job listings segment led the growth, with rising online penetration and a price hike. 58.com remains the market leader in blue-collar online recruitment. The company expects 40%+ revenue growth for job listings in 2018, contributing ~40% of total revenue by end-2018 (vs ~30% in 2017). Currently, there are ~850k paying members, while there are over 20m SMEs in China, indicating strong long-term growth potential.

• Housing Performance:
  The housing business performed better than expected in 1Q18. Management forecasts ~10% revenue growth for 2018. While the boycott from real estate agents posed temporary challenges, 58.com is still the preferred platform for commission revenue. The regulatory environment may cause short-term pressure, but the company is expected to benefit from its leadership once the market recovers.

• Valuation and Target Price:
  BOCOM Int'l has revised its 2018/19 revenue estimates and raised the target price from US$94.00 to US$100.00, implying a 40x/33x P/E ratio for 2018/19. The company maintains a "Buy" rating, based on its strong fundamentals and growth prospects.

Key Financial Highlights

Analyst Views and Rating

• Stock Rating: Buy
• Rating Basis: The stock's total return is expected to exceed that of the corresponding industry over the next 12 months.

Investment Outlook

• Long-Term Growth:
  BOCOM Int'l is positive about the long-term growth potential of 58.com's businesses, particularly Zhuanzhuan and 58 Town, due to the potential in rural areas and the second-hand market.

• Market Performance:
  The company is expected to maintain its growth trajectory, with continued investment in technology and online marketing services.

Disclosure and Legal Information

• Analyst Certification:
  The authors of the report declare that all views expressed are their personal opinions and not influenced by compensation or insider information.

• Business Relationships:
  BOCOM International has business relationships with several companies, including investment banking ties with Bank of Communications, Guilian Securities, and others. Some entities hold more than 1% of the equity securities of the mentioned companies.

• Disclaimer:
  This report is strictly confidential and intended for private circulation only. It does not constitute an offer or recommendation to buy or sell securities. BOCOM International Securities Ltd may have positions in the covered securities and may engage in various business activities with the companies mentioned, including acting as a market maker or underwriter.

Summary

58.com (WUBA US) delivered strong 1Q18 results, with revenue and non-GAAP EPS beating expectations. The company is maintaining a "Buy" rating, citing its leadership in the blue-collar recruitment market and the potential for long-term growth in online marketing and other services. Despite short-term challenges from regulatory pressures and the boycott of real estate agents, the firm is optimistic about its recovery and market position. The revised target price and improved margins further support the positive outlook.