Bukalapak (BUKA) - BUY (UNCHANGED)

Last Price: 400, TP: 1,400

Earliest of the Bunch

Successful strategies, successful year. BUKA posted a net loss of -IDR 1.6 trillion in 4Q22 (vs. -IDR 548 billion in 4Q21), mainly due to the decline in G&A (-59% yoy, -23% qoq) and Mitra’s TPV (+ 17% yoy, -4% qoq). In 4Q22, BUKA booked a consolidated TPV of IDR 41.7 trillion (+20% yoy, +1% qoq) with an astounding revenue of IDR 1.03 trillion (vs. IDR 521 billion in 4Q21), which reflected the success of BUKA's strategy to focus on segments with higher take rates, especially specialty verticals. BUKA's overall take rate went up to 2.46% in 4Q22 (+96 bps yoy, +29 bps qoq) along with a remarkable contribution margin (CM) of IDR 74 billion (vs. -IDR 35 billion in 4Q21). Cumulatively, BUKA posted a net profit of IDR 1.98 trillion in FY22 (EPS growth: -26% yoy), slightly below our estimates (90%) and consensus (88%).

New Initiatives start to bear fruit. One thing that caught our eye from BUKA’s FY22 results was its CM; BUKA posted positive CMs for two consecutive quarters, allowing the company to book a positive full-year CM of IDR 31 billion. Of all the tech companies adopting the 3P e-commerce model, we believe that BUKA is the first  Another thing worth mentioning is that the positive CM was mainly driven by higher take rates from both Mitra (2.67%; +122 bps) and e-commerce businesses (2.03%; +137 bps). To boost its e-commerce take rate, BUKA focused on specialty verticals, which naturally have high take rates (ex: Itemku has a take rate of 5-7%). Even though the specialty vertical initiative only contributed 10% of BUKA’s FY22 consolidated revenue, we believe it will be one of BUKA’s main boosters to achieve profitability; according to the management’s guidance, BUKA targets to achieve positive EBITDA in 4Q23 and profitability in 2024.

Firing on all cylinders. We believe BUKA will continue to endorse its Mitra business, given the ample room for take rate improvement and more legroom to reduce operating costs whilst developing its specialty verticals. At the moment, BUKA’s MItra business has a take rate of 2.67% (+122 bps), and there’s no sign of a slowdown. We project BUKA to book a modest TPV growth to IDR 184 trillion (+20% yoy) with a higher take rate of 2.6% (+22 bps) and a contribution margin of IDR 615 billion (+1,910% yoy).

BUY, TP IDR 400. We reiterate our BUY rating on BUKA with a TP of IDR 400, implying 4.9x FY23F EV/Sales. We believe BUKA is currently trading at an attractive valuation (2.7x FY23F EV/Sales).

Main Risks: Lower-than-expected TPV and user transaction, lower-than-expected Mitra penetration rate.