Everything You Should Know Before Grab's Q3 Earnings

GRAB is the dominant ride-hailing and food-delivery player in Southeast Asia. The platform provides a wide range of services, including ride-hailing for transportation, food delivery to satisfy cravings, as well as ventures into e-commerce and various fintech solutions. The company is expected to release Q3 2024 earnings report on 2024/11/11 ET after bell.

As the company's core business, deliveries accounted for over 50% of the revenue in Q1, with mobility close to 40%. The profit growth and contributions of these segments have attracted widespread market attention. According to Moomoo, market expectations for the Q3 2024 financial performance of the company are as follows:

● The company is projected to achieve a revenue of $699.83 million, representing a year-over-year increase of 13.79%.

● Consensus EPS is expected to be -$0.01, a 94.47% decrease in losses.

● The average price target for Grab is $4.93, suggesting a potential increase of 17.66%.

Barclays expects that while Grab's food delivery business may achieve steady growth (approximately 10% year-on-year), the major upside for growth is primarily from its mobility segment (GMV could potentially grow up to 20% year-on-year). The public transportation infrastructure in Southeast Asia is relatively lacking, which boosts the growth potential for ride-hailing services.

Additionally, the improvement in delivery margins may be starting to show in this quarter as well. Last quarter, GRAB's mobility EBITDA margin decreased by 80 basis points quarter-on-quarter, disappointing investors. Management indicated that the main reason was that the company had been launching new initiatives in the budget segment of its mobility products. However, at the same time, the company has been pushing for growth in the premium market and has started to see results this quarter, so we should expect to see an improvement in profitability in the mobility sector.

The Saver food delivery option offers consumers a lower delivery charge in exchange for a longer delivery time. This is targeted at those who are willing to wait a little longer for their meals. According to the proportion of users choosing Saver, it is most popular in Malaysia, followed by Singapore and the Philippines. In the past few quarters, when the company added the Savers product to its delivery portfolio, the delivery EBITDA margin ranged between 1.5% and 1.6%. Barclays expects the delivery margin to begin moving towards the target of over 4% in Q3.

The economy in Southeast Asia is benefiting from multinational companies relocating their operations to the region, partly due to the shift from China, and also including the expansion of Chinese companies (such as ByteDance, BYD, cloud service providers, etc.) into the area. Since July 23 this year, the Chinese government has restored a 15-day visa-free policy for Singapore citizens holding regular passports. With the resumption of international flights and the simplification of visa procedures, Southeast Asia is increasingly becoming one of the popular destinations with strong demand from Chinese outbound tourists.

Grab has been steadily developing its financial services business. Although this sector is still operating at a loss, the losses are primarily due to the establishment of its digital banking services. However, the market holds an optimistic view on the long-term prospects of fintech in Southeast Asia, believing it provides significant value creation opportunities for Grab.

Barclays expects GRAB to deliver a beat and raise 3Q and reiterates OW rating and PT of $4.70. The bank points that high mobile Internet penetration in the region provides fertile ground to grow Grab's businesses from a low base.

JP Morgan rates Grab OW. The firm believes that with the ongoing growth in the industry, easing competition, and rationalization in the delivery sector, financial performance could drive positive revisions to near-term earnings expectations. Better cost management not only supports short-term profitability but should also lead to improved platform operations and revenue growth through more affordable services.

JP Morgan also mentions some potential downside risks, including market share loss and higher incentives due to intensified competition, as well as potential future macroeconomic weakness, resulting in lower demand.