Earnings Report /
United States of America

Jumia: GMV surge could attract acquisition interest from Tech majors

  • Jumia has produced its highest GMV growth in nine quarters, underlining the virtues of its switch to FMCG items

  • The 'Amazon of Africa' is down 40% YTD and could attract acquisition interest from Tech majors

  • We reiterate our Buy recommendation on the stock at a lower target price, of US$11.30

Jumia: GMV surge could attract acquisition interest from Tech majors
Nirgunan Tiruchelvam
Nirgunan Tiruchelvam

Head of Consumers Equity Research

Tellimer Research
18 May 2022
Published by

We reiterate our Buy recommendation on Jumia on the back of its outstanding Q1 22 results. Moreover, the stock's 40% YTD decline represents an opportunity for Tech majors to acquire Africa’s Amazon.

We cut our FY 22-23 revenue estimate by 16% and lower our target price from US$14.00 to US$11.30 on account of the depressed market conditions.

An outstanding set of results

  • By switching to an FMCG focus, Jumia has put itself at the heart of daily consumption in Asia. Gross merchandise value (GMV) rose by 27% yoy to US$253mn in Q1, which is a vindication of Jumia’s strategy of diversifying its offering. In FY 20, Jumia began switching its product mix towards fast-moving consumer goods (FMCG), such as groceries, and away from electronics. FMCG items have lower ticket sizes, but sales are more resilient.

  • Jumia’s e-commerce business is gathering depth. The number of orders rose by 41% yoy, to 9.3mn.

  • JumiaPay is accelerating in step with e-commerce, placing Jumia in line with Grab and MercadoLibre, which have used e-commerce as a means of establishing digital financial services (DFS) platforms. JumiaPay's total payment value (TPV) increased by 37% yoy in Q1.

Results summary

Jumia's strong results are in line with consensus, but the revenue numbers are below our expectations. We cut our revenue forecasts based on a lower estimation of Jumia's GMV number, but were aggressive on the order size of Jumia’s e-commerce business.

Jumia: Earnings revision table

We adjust our valuation of Jumia by 18% in light of the lower FCF forecast and higher risk profile for Tech companies overall.

Jumia: FCFF valuation (US$ '000)

Jumia's recent UPS tie-up raises its profile and could attract interest from global leaders, such as Amazon and Alibaba. The company has a market capitalisation of US$723mn, which represents good value relative to the overall market opportunity in African e-commerce.

Comparables: Baby Amazons