Source: Beast Finance Author: Beast Finance
Sell-side analysts’ forecasts for Dingdong Maicai’s second-quarter financial report
Although DDL has not clearly disclosed the specific date of its second-quarter financial report, based on its previous performance announcements, Boldbeast Finance believes that Dingdong Maicai is very promising. It will likely release its second-quarter earnings in the second week of August.
Sell-side analysts currently forecast that Dingdong Maicai will achieve sequential growth and positive normalized net profit in the second quarter of 2023.
Specifically, according to S&P Capital IQ, sell-side analysts predict that Dingdong Maicai's revenue will grow from 4.9975 billion yuan in the first quarter of this year to 5.067 billion yuan in the latest quarter, a quarter-on-quarter increase of 1.4%. At the same time, it is predicted that Dingdong Maicai's non-GAAP adjusted net income attributable to shareholders will also increase by 50.0% quarter-on-quarter, from RMB 4 million in the first quarter of 2023 to RMB 6 million in the second quarter of 2023.
In the previous article about Dingdong Maicai by Boldbeast Finance, we mentioned that the actual revenue growth and net operating loss of Dingdong Maicai in the first quarter of 2023 were lower than market expectations. In this article, we will analyze whether Dingdong Maicai's second-quarter financial results will surprise analysts or disappoint them?
Sell-side analysts may be disappointed by Dingdong Maicai's Q2 results
Boldbeast Finance believes that Dingdong Maicai's financial performance in the second quarter may disappoint sell-side analysts.
In our view, sell-side analysts remain too bullish on Dingdong Maicai's near-term financial outlook. Because on a quarterly basis, Dingdong Maicai may record a decline in revenue, and there may be a normal net loss in the second quarter of this year.
Due to changes in Chinese consumer behavior and the company's strategic changes, Dingdong Maicai's actual revenue in the second quarter of 2023 may also be lower than expected.
On July 6, 2023, a review article published by Project Syndicate emphasized that after the end of China's epidemic policy at the end of last year, a large number of people have chosen to travel, socialize and eat out instead of staying at home, so we can It's reasonable to assume that since the beginning of the year, consumer demand for Dingdong's grocery shopping may have also decreased since consumers have generally been spending less time at home.
In addition, Dingdong Maicai disclosed at the 2023 first quarter financial report meeting in May, "We have changed our operating strategy to focus on developing high-quality products and building user mind share to achieve long-term growth", and admitted that this may be Temporary impact on order volume growth. Boldbeast Finance believes that any company that wishes to adjust its revenue model will inevitably suffer "short-term pain" in exchange for "long-term gains", and Dingdong Maicai is no exception. Therefore, in terms of business model optimization, Dingdong Maicai pays The "price" is likely to be weak sales in the short term.
In terms of profitability, Dingdong Maicai's actual profit in the second quarter may also be negatively affected by operating leverage and investment.
As mentioned earlier, Dingdong Maicai's revenue performance is likely to be much weaker than sell-side analysts expected, and slower or negative revenue growth will also translate into negative operating leverage, so Dingdong Maicai's revenue will continue to suffer from similar levels of high fixed costs.
In addition, optimizing the revenue model also requires additional investment by the company, which will hurt the company's profitability. During Dingdong Maicai's first-quarter earnings conference, Dingdong Maicai revealed that as part of its growth plan, it plans to invest in "deepening our upstream engagement in fresh grocery products," "non-fresh grocery categories," and "Food R&D and Agricultural Technology and Other Infrastructure".
Taken together, our view is that Dingdong Maicai's second-quarter financial results will fall short of sell-side analysts' expectations.
Depressed valuations limit further downside for Dingdong Maicai's share price
While the market may react negatively to Dingdong Maicai's possible 2Q earnings decline, the decline in Dingdong Maicai's share price is likely to be modest . This is mainly because the current valuation of Dingdong Maicai is already very low.
According to S&P Capital IQ, sell-side analysts currently expect Dingdong Maicai to sell at 0.17 times, 1.6 times and 7.3 times its expected sales price, EV/EBITDA and normalized price-earnings ratio in fiscal year 2025.
Conclusion
Dingdong Maicai's current valuation, while attractive, is not a buy. And because Dingdong Maicai's financial performance in the second quarter of 2023 may be lower than market expectations, we are currently on the sidelines of Dingdong Maicai.
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