渣打银行-变革中的中国电子商务行业.pdfVIP

l Equity Research l China l Internet l 7 July 2014 China Internet E-commerce in transformation E-commerce going mobile, going offline. China’s e-commerce market has begun to cluster into three categories: (1) classic e-commerce, focused on selling physical goods; (2) online-to-offline e-commerce, in which customers are attracted online but services (e.g. catering, fitness, movie tickets, karaoke) are consumed offline; and (3) online discount flash sales, which have evolved from the groupbuy model. Mobile commerce is also being monetised, with mobile transactions reaching 49% of total GMV at Jumei and 36% at VIPS. We believe fulfilment, sales format, payment and a mobile social networking gateway are critical in capturing mobile commerce potential. Initiate coverage of four stocks, top pick is Jumei. With the recent wave of Internet IPOs, investors now have a much richer selection of Chinese e-commerce companies to choose from. We expect the strengthening balance sheets of market leaders to accelerate consolidation and drive product and logistics network expansion. We launch our e-commerce coverage by picking leaders in subsectors: JD.com (online direct sales); VIPS (online discount retailer); Jumei (online beauty product platform) and HC International (B2B e-commerce). Jumei is our overall top pick due to its high mobile penetration, robust margins, category focus, flash sales format, clear growth strategy, lean operations and 34% upside to our price target. Reshuffle Internet portfolio ahead of Alibaba IPO. With Alibaba’s IPO around the corner, we think the 18-month Internet rally is likely to pause. We see companies with solid fundamentals, reasonable valuations and a clear earnings rebound curve as likely safe havens. We believe Tencent and Baidu stand out. Hong Kong-listed Internet stocks tend to see less competition from Alibab