Comprehensive Analysis of Indonesia’s Leading Tech Company – Gojek Tokopedia (GOTO)

Broker: UOB Kay Hian Private Limited

Date: 18th November 2024

Introduction to Gojek Tokopedia (GOTO)

Gojek Tokopedia (GOTO) stands as Indonesia’s most influential technology entity, dominating various sectors including on-demand services, e-commerce, e-wallet, and digital payment gateways. The company’s expansive reach is evident through its subsidiaries such as GoJek, GoCar, GoSend, and Tokopedia, positioning it at the forefront of Indonesia’s tech revolution.

Current Market Performance

As of the report’s date, GOTO’s share price is at Rp64, with a target price set at Rp85, indicating a potential upside of 6.1%. The company’s market capitalization is approximately Rp76.233 billion. The stock has experienced fluctuations, reaching a 52-week high of Rp116 and a low of Rp50, illustrating its volatile yet promising nature.

Financial Forecast and Projections

GOTO has ambitious financial goals for 2025. It anticipates the adjusted EBITDA for its on-demand services to touch Rp1 trillion and its fintech division to achieve Rp200 billion. However, the e-commerce segment, particularly Tokopedia, remains unpredictable due to heavy competition and substantial spending by TikTok to maintain market share.

On-Demand Services (ODS) and Fintech Growth

The on-demand services division is projected to see a mid-teens growth in gross transaction value (GTV) for 2024, with an adjusted EBITDA margin improvement of 25 basis points quarter-on-quarter, reaching 1.1% by the end of 2024. By 2025, the margin is expected to settle at 1.2%, contributing significantly to the overall earnings.

Similarly, the fintech sector is set for robust growth. The loan book is anticipated to grow by 20% year-on-year to reach Rp5-5.5 trillion by December 2024 and further expand to Rp8.6 trillion by the end of 2025. This growth is expected to turn around the fintech division’s EBITDA from a loss of Rp130 billion in 3Q24 to a gain of Rp200 billion in 2025.

Challenges in E-commerce

The e-commerce sector, primarily Tokopedia, faces challenges with its profitability. The intense competition from TikTok, which has invested heavily to retain market share, has resulted in significant losses for GOTO, recording a Rp2.4 trillion loss in income from associates. These losses are projected to persist into 2025, making it difficult to predict future profitability accurately.

Indonesia’s Digital Economy Outlook

According to a presentation by Google, Bain, and Temasek, Indonesia’s digital economy is poised for substantial growth. The digital economy’s GTV is expected to grow by 13% from US\$80 billion in 2023 to US\$90 billion in 2024, with projections of reaching US\$200-300 billion by 2030. E-commerce, transportation, food delivery, online travel, and media are all expected to see significant growth.

Financial Performance Summary

GOTO’s financials reflect a challenging yet potentially rewarding journey. The company’s EBITDA is projected to improve significantly from a loss of Rp24,504 billion in 2022 to a positive Rp6,145 billion by 2026. Operating profits and net profits are also expected to recover over the coming years, although challenges remain due to the unpredictable e-commerce segment.

Recommendation

Despite the challenges, particularly in the e-commerce sector, UOB Kay Hian maintains a “BUY” recommendation for GOTO. The recommendation is underpinned by the expected improvements in operational efficiencies and the promising growth in the on-demand and fintech sectors, offering a potential 30% upside.

Conclusion

Gojek Tokopedia is navigating a dynamic and challenging market environment with a strategic focus on growth and operational efficiency. While there are hurdles, particularly in e-commerce, the overall outlook remains positive, driven by robust growth in on-demand services and fintech. Investors are advised to consider the potential upsides and the strategic position of GOTO in Indonesia’s burgeoning digital economy.