20221114-招银国际-China_Internet_Sector_2022__11.11__Moderate_recovery_with_quality_growth_13页_1017kb

China Internet Sector: 2022 "11.11" Summary

Core Content

The 2022 "11.11" shopping festival saw a moderate recovery with a focus on quality growth, agricultural incentives, domestic promotion, and user experience. The total GMV reached RMB1,151bn, a +13% YoY increase, according to Syntun data. This performance was driven by the continued growth of short videos, which accounted for 16% of total GMV, up from 7% in 2021. Livestreaming e-commerce also delivered +146% YoY growth, outperforming comprehensive platforms that saw +2.9% YoY growth.

Key Platforms and Performance

• Pinduoduo (PDD):

  • Offered the longest official sale period (20 Oct to 11 Nov) with heavy subsidies and competitive pricing.
  • Expected GMV growth >30% YoY for the "11.11" period, with a forecast of +17% YoY in FY23E.
  • Strong performance from domestic brands and Temu.
  • Top Pick: PDD

• JD.com (JD):

  • Maintained resilient momentum with +14% YoY GMV growth.
  • Driven by Gen Z and silver consumers, lower-tier cities, and strong 3C and FMCG performance.
  • JD PLUS membership showed strong consumption.
  • Top Pick: JD

• Kuaishou (KS):

  • Recorded orders >+515% YoY and buyers >+40% YoY in the "11.6" promotion.
  • Kuai Brands (快品牌) performed well, with GMV >+80% YoY.
  • Resumed cooperation with Tmall and JD from 10.28, supporting growth.
  • Expected +25% YoY GMV growth in 3Q22E and +31% YoY in 4Q22E.
  • Top Pick: Kuaishou

• Douyin (TikTok):

  • Achieved triple-digit GMV growth in the "11.11" period, the highest growth among top 5 platforms.
  • 86% YoY increase in the number of merchants participating, with daily sales up 156%.
  • Shopping mall feature boosted product views to 1.6x of 1H22 levels.
  • Top Pick: Douyin

• Alibaba (BABA):

  • Tmall GMV stable YoY, slightly below expectations.
  • 3C & home appliance, beauty, and pet categories showed double-digit growth.
  • Expected GMV recovery in 4Q22E from a low single-digit decline in the September quarter.
  • Top Pick: Alibaba

• Baozun (BZUN):

  • Disclosed GMV of RMB21.5bn, a +12.3% YoY increase.
  • Resilient growth driven by omni-channel strategies, brand synergy, and enhanced technology and logistics.
  • Top Pick: Baozun

Market Trends

• Livestreaming e-commerce continued to be a key growth driver, with top hosts significantly boosting GMV.
• Domestic brands gained traction, with many achieving strong GMV growth and increased market share.
• User engagement and traffic support were enhanced through cooperation between platforms.
• Consumption behavior shifted towards value-for-money products and domestic goods due to macroeconomic uncertainties and soft consumption.

Valuation and Outlook

• The China e-commerce sector is currently trading at 12.6x FY23E P/E, which is at a 5-year historical trough.
• Price rebound of +15% in the past two weeks due to reopening expectations and potential positive reports on China ADR audit disputes.
• 12-month forecast for China e-commerce GMV growth at +13% YoY in FY23E, with PDD > JD > Meituan > Kuaishou > Alibaba > Baozun as the pecking order.
• Margin improvement is expected in FY23E, supported by operating leverage and narrowing losses in new businesses.

Catalysts for Future Growth

• Better-than-feared 3Q22E results.
• GMV acceleration in 4Q22E.
• Positive reports from PBAOC on China ADR audit dispute in December.
• Further relaxation of quarantine measures.
• Enhanced user experience and traffic support through platform cooperation.

Key Figures and Data

• GMV performance:

  • Tmall: +0.2% YoY (pre-sale), with 3C & home appliance, beauty, and pet categories showing strong growth.
  • PDD: >+30% YoY growth expected for "11.11", with domestic brands and agricultural products as key drivers.
  • JD: +14% YoY GMV growth in "11.11", with 3C & home appliance and FMCG showing strong performance.
  • Kuaishou: >+515% YoY growth in orders, >+40% YoY growth in buyers.
  • Douyin: Triple-digit GMV growth, with shopping mall and brands engagement as key factors.
  • Baozun: +12.3% YoY GMV growth, with omni-channel and brand synergy as drivers.

• Valuation Table:

  • PDD: Market Cap USD82,413M, P/E FY22E: 20.2x, FY23E: 16.2x, FY24E: 13.1x, P/S FY22E: 4.7x, FY23E: 3.8x, FY24E: 3.3x
  • BABA: Market Cap USD187,366M, P/E FY22E: 9.9x, FY23E: 8.3x, FY24E: 7.4x, P/S FY22E: 1.5x, FY23E: 1.3x, FY24E: 1.2x
  • JD: Market Cap USD76,416M, P/E FY22E: 23.6x, FY23E: 17.9x, FY24E: 13.8x, P/S FY22E: 0.5x, FY23E: 0.4x, FY24E: 0.4x
  • Baozun: Market Cap USD232M, P/E FY22E: 8.1x, FY23E: 3.8x, FY24E: 2.6x, P/S FY22E: 0.2x, FY23E: 0.2x, FY24E: 0.1x

Analysts

• Sophie Huang: (852)39000889, sophiehuang@cmbi.com.hk
• Eason Xu: (852) 3900 0849, easonxu@cmbi.com.hk

Conclusion

The 2022 "11.11" shopping festival marked a moderate recovery in China's e-commerce sector, with short videos and livestreaming e-commerce leading the growth. Key platforms such as PDD, JD, Kuaishou, and Douyin showed strong performance, driven by cooperation, domestic brands, and user engagement. The sector is expected to rebound in FY23E with +13% YoY GMV growth, and a gradual re-rating is anticipated, with a potential 20% upside. The pecking order is PDD > JD > Meituan > Kuaishou > Alibaba > Baozun.