Section 1: Company Fundamentals

Section 2: GigaCloud Technology Inc (“Watch” at USD 53.82, the current market price as of August 22, 2022, at 07:10 am PDT)

2.1 Company Details

GigaCloud Technology Inc is a Hong Kong-based holding company mainly engaged in the business-to-business electronic commerce business for large parcel merchandise. The business runs the e-commerce platform GigaCloud Marketplace, which combines tools for discovery, payments, and logistics.

2.2 Company financials

• Up trending revenue: The company has performed well in the past three years as revenue went up by around 3.39x from USD 122.3 million in FY19 to USD 414.48 million in FY21. Furthermore, the service revenue saw growth of around 6.49x over the same time while representing 23.74% of the total revenue of the firm.
• Improved profitability margins: The company earned around 18.15% of the total revenue as gross profit in FY19, which went up to around 21.63% by FY21, showcasing improved efficiency in reducing the direct cost for the firm. On the other hand, the operating margin increased from around 3.92% in FY19 to 9.5% in FY22.
• Increased Financial leverage: GCT’s interest expense has increased from nil in FY22 to USD 309,000 in FY21, signifying increased balance sheet risk.
• Weak profitability for FY22: GCT’s operating income for the three months ending on March 31^st has decreased on a YoY basis from USD 10.58 million in FY21 to USD 7.48 million in FY22.

2.3 Key Risk analysis

• System outages that make it difficult to access the GigaCloud Marketplace or other performance issues with its technological infrastructure might harm GCT's standing and operational outcomes. For instance, if one of GCT's data centres fails or has a service disruption or deterioration, the firm may lose client data and miss deadlines for order fulfilment, which might be detrimental to its business.
• It's possible that GCT's previous growth rates and performance are not sustainable or prognostic of the company's future expansion and financial performance. GCT cannot promise that the firm will continue to expand at the same rate as it has so far.

2.4 Stock recommendation

GCT had an IPO on the 18^th of August with a price of USD 12.25 and since then the price has increased by around 4.39x, showcasing a successful IPO for the company. The company over the past years has increased its revenues and profitability margins except for the quarter ending 31^st March 2022. Hence, considering the recent volatility in the price due to its IPO, already a return of 4.39x over almost two trading sessions, financials, high possibility of large financial loss, and risk associated, a “Watch” recommendation is given on the stock with the current market price of USD 53.82 as of August 22, 2022, at 07:10 am PDT, with further analysis once the volatility will get reduced and become suitable for investment purpose.

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 22 August 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.