Hepsiburada - Beneficiary of the new sales tax on imported merchandise

New taxes on imported merchandise sold online marketplaces. The Turkish government has introduced new taxes targeting e-commerce. Any e-commerce purchase online imported and addressed to a real person in the country with a ticket price below 30 euros is now subject to a new sales tax. If the merchandise country of origin is the European Union, the tax rate is set at 30%, or 60% if from other countries. The new taxes will become effective from 20 August 2024.

Aimed at platforms selling lower-priced items. We have not yet ventured to work out the potential impact of the new code across companies operating online marketplaces in Turkey. The new code, however, appears punitive for and aimed at those platforms that sell and distribute lower-priced items at high frequency such as Alibaba and, potentially, PDD Holdings (Pinduoduo and Temu), and Amazon.

Generally positive for Hepsiburada and companies sourcing locally. We would see the tax to be generally positive for e-commerce and online marketplaces that largely source locally including Hepsiburada.The inbound (imported) merchandise makes up less than 2% of Hepsiburada's total GMV and hence its impact is likely to be immaterial. More important would be the substitution effect as locally procured merchandise replace the imported ones. As a marketplace largely relying on local companies, Hepsiburada should be a net beneficiary.

Valuation on price to sales against sales growth outlook. We quote below the current price to sales multiples on 2023A revenues across e-commerce and marketplaces we follow. Hepsiburada (HEPS) - 0.4x, Mercado Libre (MELI) - 6.0x, Allegro (ALE) - 3.6x, Jumia (JMIA) - 6.7x, PDD Holdings (PDD) - 0.7x, Coupang (CPNG) - 1.5x, Amazon (AMZN) - 3.3x. The best way to put these multiples in context is comparing them against sales growth outlook. Hepsiburada has the highest sales CAGR 3yr out (35-40pct) followed by Mercado Libre and Allegro.