[Click eStock] "Naver Faces Growing Concerns Over China's Alibaba and Temu, Valuation Remains Attractive"

On the 12th, Korea Investment & Securities maintained a target price of 270,000 KRW and a 'Buy' investment rating for Naver, stating that the threat from Chinese direct purchase (jikgu) presents a complex valuation appeal.

Researchers Jeong Ho-yoon and Kim Ye-rim noted, "Despite strong Q4 earnings, the stock price has been continuously declining," adding, "This is because Chinese direct purchase platforms such as Ali and Temu are expanding their market share in the domestic market, intensifying concerns about the slowdown in growth of Naver's commerce business."

The two researchers analyzed, "Especially since the second half of 2023, Naver has been making efforts to boost sales by launching new business models (BMs) such as the Arrival Guarantee Solution and Brand Package Solution in commerce, so the rapid rise of Chinese direct purchase platforms has emerged as a concern for investors."

In fact, Ali and Temu have shown remarkable growth. AliExpress started its domestic service in 2018, with the average quarterly Chinese direct purchase amount at about 130 billion KRW in 2018, which increased to 1.5 trillion KRW in 2022. Since the first quarter of last year, it surpassed the US, the largest direct purchase country, to take the top spot.

The two researchers stated, "In Q4, the quarterly transaction amount exceeded 1 trillion KRW, a 161.1% increase year-on-year, raising a sense of crisis in the domestic e-commerce industry," and evaluated, "According to Sensor Tower, AliExpress's monthly active users (MAU) are about 4.7 million, and Temu's about 2.89 million, with a steep growth rate. The continued increase in app downloads suggests that user metrics will keep growing."

They added, "The high growth of Chinese direct purchase should be viewed somewhat complexly," and said, "It is a simplistic conclusion to say that the high growth of Chinese direct purchase will negatively affect the domestic e-commerce market; it is necessary to analyze the current situation from multiple angles." This is because the share of direct purchase amounts in the domestic e-commerce market has been maintained at 2.5% to 3.1%, and the main direct purchase items are clothing and fashion-related products.

However, they noted, "What will be important going forward is whether Chinese direct purchase platforms change their strategies," adding, "What should be worried about in the long term is not the 1.7% growth in Chinese direct purchase transaction amounts in the domestic e-commerce market, but the possibility that Chinese platforms may intensify platform competition by operating open market businesses domestically."

The two researchers concluded, "We still believe it is a situation to focus on Naver's profit improvement and valuation appeal," and assessed, "The growth of Chinese platforms is an issue that needs to be continuously monitored; however, their potential to grow enough to negatively impact Naver's commerce division's performance over at least the next 1 to 2 years is quite limited."

This content was produced with the assistance of AI translation services.