Net profit surged 144.6% in the third quarter but still fell short of market expectations; analysts have mixed views on Donghai's target price | Lianhe Zaobao

The competition in Southeast Asia's e-commerce is fierce, and Sea Ltd has increased spending to cope with the competition, resulting in the latest quarterly profits falling short of market expectations, causing the company's stock price to plummet over 8%. Market views on the group's prospects are mixed, with some analysts lowering the target price for Sea's stock. The group released its third-quarter results for the fiscal year on Tuesday (November 11). The net profit for this quarter was USD 375 million (approximately SGD 489 million), which, despite a year-on-year increase of 144.6%, was still far below the analyst expectation of USD 433 million. The group's revenue rose 38.3% in the third quarter to USD 6 billion, exceeding the market estimate of USD 5.65 billion. After the earnings release, Sea's stock price fell sharply on Tuesday, closing down 8.22% at USD 142.31. Malayan Banking Berhad lowered its target price for Sea from USD 172 to USD 156, a decrease of about 9%, while maintaining a "hold" rating. The report noted that although Shopee's gross merchandise volume surged 28% year-on-year, the adjusted EBITDA has declined for two consecutive quarters, falling short of market expectations by about 15% to 16%. Shopee's adjusted EBITDA for the third quarter was USD 186 million. Malayan Banking Berhad believes that Sea's financial services business, Monee, is growing rapidly, with total loans increasing by USD 1 billion each quarter. However, given that users and merchants are just joining, product diversification, and investment in marketing, short-term profit margins may be under pressure. Further Reading E-commerce and financial services continue to grow, Sea and Grab's performance expected to be bright The world is at the AI tipping point, Li Xiaodong: The impact of AI far exceeds that of mobile internet HSBC is relatively optimistic, maintaining a "Buy" rating on Sea and a target price of $200. The report points out that Sea's investment in Shopee helps improve platform logistics, content, and customer service, driving long-term growth in gross merchandise volume. HSBC expects that the improvement in Shopee's profit margins and the growth of its fintech business will drive a compound annual growth rate of 40% in adjusted EBITDA over the next three years. Intense Regional Competition: Sea's Operating Expenses Grew Nearly 30% in Q3 As a Southeast Asian e-commerce giant, Sea faces fierce competition from ByteDance's TikTok Shop, Alibaba Group's Lazada and Taobao, as well as the aggressively expanding Chinese cross-border e-commerce platforms Shein and Temu under Pinduoduo. To consolidate its market position, the group has increased its investment in regional markets for marketing, advertising, and user acquisition. Overall operating expenses rose 28% in Q3 to $2.12 billion; sales and marketing expenses also increased by 31%. In October this year, the group's Chairman and CEO, Forrest Li, mentioned in an internal letter to employees that driven by the rapid development of artificial intelligence (AI), the group's market value is expected to soar ninefold, reaching $1 trillion. To improve customer experience and attract more online shopping users, Sea has established its own delivery network, SPX Express, which currently handles most of the packages on the Shopee platform. At the same time, Shopee has raised the commission rates for merchants in several core markets, with current commission levels now higher than competitors, indicating the group's confidence in retaining and attracting merchants through its large user base and comprehensive logistics services. Shopee's Q3 revenue grew 35% to $4.3 billion, and gross merchandise volume increased 28% to $32.2 billion