GOTO - Improved, yet headwinds remain

GOTO - Improved, yet headwinds remain GoTo Gojek Tokopedia (GOTO) has continuously showed an improvement in performance in 3Q23 by narrowing Adj. EBITDA loss to - 0.6% of GTV and expanded CM at 0.8% of GTV thanks to cost initiatives. GTV growth also returned to positive amidst lower overall take-rate, dragged down by e-commerce. GOTO strives to improve its product diversification in all segments that is mostly focused on price conscious customers. For on-demand service, the company seeks for geographical expansion for GoCar Hemat, Go-Ride Transit and piloting Go-Ride Nego. On e-commerce, Tokopedia eyes to further improve customer convenience and reliability through better search and enhance assortment as well as ads revenue currently contributed 1/4 of e-commerce revenue. On fintech, GOTO has started to roll-out cash loan whose significant quarterly growth of 44% for outstanding loan of IDR1.4 tn in 3Q23 with manageable asset quality. The effective interest charge for GOTO's BNPL is roughly c. 4%/month, depending on lending tenor. (Source: Company) Comment: We maintain our BUY call with lower target price target of IDR97 (previously: IDR143/share) on adjustments of valuation method, peers' multiple valuation in 2024 and ARTO's fair value. We also conservatively maintain our Adj. EBITDA breakeven forecast by 2Q24 as management highlights intense competition poses risks to Adj. EBITDA target.