Vipshop Holdings Limited

VIPS Details

Vipshop Holdings Limited (NYSE: VIPS) is a China-based online discount retailer for brands. It operates through 1) Vip.com, which provides customers with high-quality and trendy branded products through flash sales on the vipshop.com and vip.com online platforms, 2) Shan Shan Outlets, which runs offline retail locations in China, and 3) Others, comprising VIPS' other two divisions, i.e., internet finance and offline shop. As of September 23, 2021, it has 676.21 American Depository Shares (ADS) listed and outstanding, with each ADS representing 0.2 Class A ordinary shares.

Q2FY21 Results: The company reported a YoY increase of 22.80% in total net revenues to RMB 29.61 billion in Q2FY21 (ended June 30, 2021) in contrast to RMB 24.11 billion in Q2FY20, primarily due to a 32% YoY growth in the total number of active customers during the quarter. In Q2FY21, VIPS' Gross Merchandise Value (GMV) improved by 25% YoY to RMB 48.1 billion, attributable to 30% YoY growth in total orders to 221.5 million. Net income for the company decreased to RMB 1.09 billion in Q2FY21 from RMB 1.54 billion in Q2FY20. As of June 30, 2021, the company had cash and cash equivalents (including short-term investments) of RMB 19.31 billion and total debt of RMB 1.96 billion.

Quarterly Gross Profit and Margin  (In RMB millions) (Source: Investor Presentation, August 2021)

Risks: In FY20, online retail sales of apparel products accounted for the majority of VIPS' revenue. As a result, any downturn in sales volume or customer base could hurt the company's financial performance.

Moreover, the Chinese authorities' crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent the company's operations. This is after the passage of a bill in the US that could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Outlook: As of Q2FY21, VIPS expects to clock revenue in the range of RMB 24.3 – 25.5 billion in Q3FY21, representing YoY growth of about 5% – 10%.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

   (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

 VIPS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: VIPS' share price has decreased 38.79% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 11.96 to USD 46.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 31.47. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 14.81. Considering the correction in the stock price in the past three months, decent financials, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 12.15, down 4.56% as of September 23, 2021, 3:11 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Viant Technology Inc.

DSP Details

Viant Technology Inc. (NASDAQ: DSP) is a people-based advertising software company. Its self-service demand-side platform, Adelphic, allows marketers and advertisement agencies to plan, buy, and measure advertising across several channels. DSP derives its revenue by charging platform fees from its customers, either a percentage of the spending or a set monthly subscription fee and payments for extra features like data and advanced reporting. The company's shares were listed on NASDAQ on February 10, 2021, at an issue price of USD 25.00.

Fraud Prevention Through Collaboration: On September 22, 2021, DSP announced the expansion of its partnership with Integral Ad Science (IAS), a New York-based company engaged in digital media quality, to integrate IAS' Connected TV (CTV) fraud protection solutions within the Adelphic platform. This partnership enables DSP's brands and agencies to optimize their CTV advertisements to minimize bot fraud and other forms of invalid traffic (IVT).

Enhancing Value For Its Customers: On September 09, 2021, DSP partnered with Kochava Collective, an independent mobile data marketplace, to integrate the latter's real-world location data within the Adelphic advertising software to increase location-based analytics and foot traffic movement for its brand and agencies. Partnering with Kochava Collective enables brands and agencies to understand better how their marketing efforts are influencing foot traffic and, ultimately, leading brick-and-mortar sales.

Q2FY21 Results: The company reported a YoY surge of 65.69% in revenues to USD 50.41 million in Q2FY21 (ended June 30, 2021) compared to USD 30.43 million in Q2FY20, primarily due to growth in the number of active customers and average contribution. However, net loss for the company increased to USD 3.66 million in Q2FY21 vs. USD 0.03 million in Q2FY20. As of June 30, 2021, the company had a cash balance of USD 252.27 million and total debt of USD 17.5 million.

Active Customers and Adjusted EBITDA (Source: Q2FY21 Earnings Presentation, August 12, 2021)

Key Risks: DSP generates most of its revenue from a limited number of advertising agency holding companies. In FY20, its top two advertising agencies represented 13.3% and 13.2% of the total FY20 revenue. Hence, the loss of any of these critical customers can adversely impact the company's financial position. In addition, DSP depends on third-party data center hosting providers (such as Google Cloud Platform and Amazon Web Services) to ensure that its servers have constant power, internet access, and technological protection. As a result, any service interruption or facility damage could impact its operations.

Outlook:

Q3 and FY21 Guidance Range (Source: Q2FY21 Earnings Presentation, August 12, 2021)

Valuation Methodology: Price/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DSP Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: DSP's stock price decreased 57.94% in the past three months and is currently leaning towards the lower band of its 52-week range of USD 11.50 to USD 69.16. The stock is currently trading below its 50 DMA level, and its RSI Index is at 37.49. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 14.98. Considering the attractive valuation of the newly listed company, recent collaborations, strong balance sheet, encouraging outlook, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 12.40, up 1.89% as of September 23, 2021, 12:00 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.