In the last two years, Pinto has risen 40%, 79%, and 151% in the two years combined, and the share price has returned almost 2/3 of its highest point. This performance can be said to be extremely difficult in the context of the overall decline in the mid-cap stocks. In contrast, Alibaba has fallen 34% over the two years, leaving only a quarter of the highest point remaining, Kyoto down 57%, and the share price also only a quarter of its previous high.

On the one hand, there is a sharp rise, on the other hand, a sharp fall. Under two icy days, at the end of November 2023, the market capitalization surpassed Alibaba to become the largest company by market capitalization in the domestic e-commerce platform.

In an environment of low consumer confidence, a number of roundabouts have been achieved in the extremely intransigent e-commerce industry. So, how much is it possible for the team to continue to maintain its lead? By looking at its financial statements, we can grasp three key points: changes in performance growth, changes in profitability, and the contrast between actual results and expectations.

1. Accelerated change in performance

There are two things you can look at for a wide variety of performance growth, including the change in its own performance growth and the contrast with its e-commerce peers.

The rise of many upturns, most intuitively, is reflected in the rapid growth of revenues. From Q1 2022 to Q3 2023, multiple revenue growth accelerated most of the time, nearly doubling year-on-year growth in the latest Q3 2023 quarter. Rapid earnings growth is also a major driver of its strong share price gains.

There are two main drivers of revenue growth in the country. Previously, people's consumption showed a downward trend in the context of low economic confidence, and the relatively low price tag became the biggest beneficiary. Later, under the power of Temu, a number of international businesses skyrocketed to become another important growth point in revenue.

So how does a lot of it compare to its e-commerce peers? Mainly contrast with Ali and Kyodo. We compare the revenue growth rate of these three e-commerce companies and the share of cost of sales in revenue.

First, let's look at the comparison of the three companies' revenue growth and faster revenue growth, indicating that the company is in a favorable position in the competition. While most of its revenue is related to e-commerce, Ali's business is more diversified, choosing its core e-commerce business revenue as a comparison.

We see that starting in 2022Q2, which triggered a surge in multi-share prices, revenue growth in multiple quarters has significantly outpaced Ali and Kyodo. While both Ali and Kyoto maintained single-digit growth and even declines, 2023 was a period of continuous acceleration in growth in each quarter.

Let's look at the comparison of the cost of sales of the three companies, and if they tend to rise, they may be at a disadvantage in the competition.

We see that since the first quarter of 2022, many sales expenses have been a part of revenues, although seasonal fluctuations are due to events such as 618 and double eleven, the overall trend is downward, falling from 47.2% in 2022Q1 to 31.6% in 2023Q3. On the contrary, the cost of sales increased overall, from 16.5% in 2022Q1 to 18.5% in 2023Q3, which was a small increase, but a strong killer. The overall balance of sales expenses in Kyoto remained stable, with a slight decrease.

For future forecasts, it may be difficult for us to expect much to maintain near double rates, and even a steady increase of more than 30% may be difficult to achieve. After all, the explosiveness of Temu's international business growth still needs further observation.

We also need to pay attention to how much revenue growth is still significantly ahead of its peers, and how many sales costs are likely to remain steady or downtrend on a trend basis, thereby determining whether multiple units can remain competitive with each other.

2. Changes in profitability

The second point of concern for multiple reports is the change in profitability. Mainly includes gross margin and net profit margin.

In terms of gross margin, many gross margin levels have been on an upward and downward trend since the first quarter of 2022, largely due to the scale effect of rapid revenue growth. Starting in the third quarter of 2022, the gross margin of Pato began to decline quarter-on-quarter, dropping from 79.1% en route to 61%, with footfall down 18 percentage points.

Many of the reasons for the lower interest rates are not that the original domestic business did not make as much money, but mainly the Temu international business, which began in the fourth quarter of 2022, as well as the multicooker business launched in recent years, required a lot of money support users as they expanded rapidly in the early stages.

MANY BUSINESS SEGMENTS DO NOT DISCLOSE REVENUE AND PROFIT PERFORMANCE SEPARATELY, BUT FROM A BUSINESS PERSPECTIVE, THIS BUSINESS IS LIKELY TO HAVE A NEGATIVE GROSS MARGIN, INCREASING PROFITS AHEAD OF DEVELOPMENT, THEREBY LOWERING OVERALL GROSS MARGIN PERFORMANCE.

However, in Māori, there are still two points worth paying attention to. First of all, the overall change in gross profit, we see that many levels of gross profit have continued to grow amid the decline in gross margins. Gross profit in 2023Q3 was 420.1 billion, up 42% year-on-year.

At the same time, we can also keep an eye on the marginal improvement of the slippage below the gross margin. We see that in the three quarters leading up to 2023, the magnitude of the decline in the polyamorous interest rate was 7.1, 6.2, 3.2 percentage points, and the overall downward slide is narrowing. Continued tapering could mean that the Temu business or the multi-buyer business is improving and even turning a profit into a profit.

From the point of view of the net profit ratio, much of the same showed an increase in the level of net profit, but the net profit rate declined overall. The main reason for the decline in the net profit margin was, of course, a significant drop in the gross profit margin. However, we can also see that the extent of the decline in the multiple net profit margin is much lower than the decline in the gross margin.

This is mainly due to a lot of control over business expenses. Many sales expenses decreased from 39.6% in 2022Q3 to 31.6% in 2023Q3, R&D expenses decreased from 7.6% to 4.1%, and management expenses decreased from 2.6% to 1.1%. The overall operating expense ratio decreased from 49.7% to 36.8%, partially offsetting the impact of the decline in gross margin on the net profit ratio.

The decline in the business expense rate is largely a reflection of a number of growing operating efficiencies, and the increasing volume in the e-commerce industry is an important competitive advantage. We can then continue to focus on a wide range of operating expense trends and the resulting impact on net profit margins.

3. Comparison of actual results and performance expectations

With so much revenue being a big pot of disclosure, not broken down into business segments, plus corporate management rarely syncs operating data to the outside world ahead of the report, there can be a lot of performance flexibility, with actual results published each time likely to match Wall Street analysts' expectations. Generates a large margin of variance, which means that a large number of shares can fluctuate enormously after the results are published.

On the Futubull app, we can see a wide range of performance predictions and comparisons of actual performance. In the most recent three quarters, multiple consecutive triple-A outperformance is expected, while other share prices have risen after each successive performance. Ahead, the results of the market's many new financial reports may be more predictable.

In terms of earnings, the Futubull APP shows that analysts currently forecast for more than 759 Q4 earnings in 2023. If the profit margin of the actual release exceeds this time limit, the short line share price may turn out to be a good profit. Conversely, if the actual performance is lower than expected, there will be a short line profit.

So what if so many results just met expectations? There may also be a certain amount of profit, as many have already exceeded expectations three times in a row, and it may be good to want to boost the share price even if it is not enough.

Finally to summarize:

In terms of performance growth, many of them grew significantly more than their peers, and the percentage of sales expenses also decreased, indicating that the company continues to strengthen its competitiveness in the industry, and we can see if the company can continue this trend in the future.

In terms of profitability, many gross margins fell significantly due to money-burning businesses such as Temu, while the operating expense ratio showed a significant improvement and a slight decrease in net profit. Subsequently, we can focus on the improvement in the margins of the company's gross margin and whether it can continue to maintain high operating efficiency, resulting in an improvement in the net profit margin.

When it comes to performance expectations, many results are more flexible, and we can pay attention to the contrast between actual results and performance expectations, which can be good for the share price if it exceeds expectations significantly.