Hepsiburada in the lead up to June quarter earnings

Hepsiburada consensus. The consensus estimates for Hepsiburada's June quarter are hard to find. Inflation accounting is making the analysts' jobs particularly challenging. We would instead focus on margin trends. The June quarter should provide guidance about what is to come between now and the end of the year. Going forward, we see pent-up demand for discretionary lines gaining steam and boosting sales in the lead up to the peak season of school openings and holidays.

The first full year of earnings. 2024 should be the first full year of earnings delivery, on our assumptions. The upside risk with Hepsiburada, which has not reported any earnings in any of its full-year financial statements so far, reporting first full year earnings is significant. The stock is trading circa 0.5x sales, which makes it the single most attractive internet/online marketplaces/e-commerce stock among its peers.

Turkish consumer activity has hit the bottom, recovery is work in progress. We may have seen the worst in consumer activity in Turkey with risks now tilted to the upside. Consumer discretionary spending was weak in the March quarter by any metric. We started seeing recovery off low base from April onwards. Credit sales have indeed picked up from April lows and are gaining momentum driven by negative real interest rates, more than anything else.

High inflation and retailing gross margins. High inflation is potentially boosting gross margins as sales repricing starts exceeding cost of sales repricing. Most Turkish retailers, in store or online, have not reported June quarter financials yet with the exception of Ebebek. Ebebek did indeed report wider margins both at the gross (+380bp) and EBITDA (+180bp) level. We are awaiting the 2Q results from the larger retailers including Migros (20 August), Teknosa (28 August), BIM (20 September). Below are the headlines from online marketplaces that have reported June quarter earnings including a summary of Ebebek financials.

Mercado Libre (NASDAQ: MELI). MercadoLibre reported yet another strong delivery in its June quarter financials more than doubling earnings on the year and beating estimates 24%. The company reported strong double-digit growth across the P&L. The stock broke the $100B market cap for the first time this week to celebrate the beat.

Alibaba (NASDAQ: BABA). Alibaba somewhat missed the estimates due largely to weak consumer demand in China. Alibaba's international commerce business posted 32% growth year-on-year versus +45% reported during the March quarter. The international ecommerce business booked an EBITDA loss of RMB3.7B in the June quarter versus the loss of RMB4.0B reported for the March quarter of 2024.

Jumia Technologies (NYSE: JMIA). Jumia reported $36.5 million in June quarter revenues missing the consensus estimates of $41.7 million. The June quarter orders are up 6.9% year on year or +4.9% on the quarter. The GMV measured in constant currency grew 35% on the year driven by expansion in growth in products and services. The loss is narrower on year-on-year comparison.

Magazine Luiza (MGLUY). The June quarter revenues posted 11% growth driven by the growth in 1P and the services. The EBITDA grew 62% year-on-year with a margin of 7.9%. The company posted the third consecutive quarter of earnings.

Ebebek (BIST: EBEBK). The June quarter revenues grew 10% on the year driven by wider margins. Gross income and EBITDA posted 23% and 29% growth year on year, consistent with 35.4% (+380bp) and 12.3% (+180bp) margins. The revenue mix at Ebebek is as follows: in-store sales -90%, e-commerce (1P) - 7%, marketplace (3P) - 3%.