FOCUS: Marketplace Ozon tests car sales as quotes spiral up in 2023

By Yekaterina Yezhova

MOSCOW, Oct 9 (PRIME) -- Pilot car sales have become part of Ozon’s proactive growth strategy as its quotes have almost doubled since the beginning of 2023, but some analysts think the Russian marketplace’s receipts may be overvalued.

“Ozon has become the first marketplace to launch online car sales with Chery becoming the first brand represented on the platform. At the first stage, home delivery of cars will be available for Moscow and the Moscow Region, but the geography of the project will expand in the future,” Alexei Makhmudov, head of Ozon’s department of automobiles and sports, told PRIME.

Ozon offers the whole gasoline model range of the Chery brand – crossovers Tiggo 4 Pro, Tiggo 7 Pro Max, Tiggo 8 Pro, Tiggo 8 Pro Max, and business class sedan Arrizî 8 in a special section.

The news pushed Ozon’s depositary receipts up by 3% to 2,644.50 rubles on September 27, when the pilot was announced. The quotes leaped by 88.50% since the beginning of the year and closed at 2,645.50 rubles on October 6.

Cifra Broker said in a research note that the marketplace’s securities outperform the market as “the company stimulates opening of pick-up points in small towns and villages with improved terms of cooperation for partners and starts dealing in cars.”

Sinara Bank senior analyst Konstantin Belov said that Ozon’s quotes grow fast but the market overvalues the company.

“We believe the firm has every chance to stay one of the two leaders (including Wildberries) on the expanding Russian e-commerce market in the long-term. In April–June 2023, Ozon again demonstrated an impressive rise of gross merchandise value (GMV) and revised up its growth outlook for 2023 to at least 80% for a second time this year,” he said in a note.

“But the margin disappoints and questions the company’s ability to improve the unit economics steadily and quickly while staying in tune with the current high valuations.”

Belov also pointed to the risk related to Ozon’s need in external financing to maintain high growth rates because the company still generates mainly negative free cash flows.

“Ozon is a company with aggressive growth plans…Over the recent five quarters, it has been showing positive adjusted EBITDA that benefited the company’s market valuation,” Finam analyst Anna Buylakova told PRIME.

“In August, the management said that scaling the business up and boosting the turnover are the company’s current strategic priority: GMV’s rates sped up to 118% year-over-year in April–June from 71% year-over-year in January–March, thanks to, among others, promotion activities that impacted the margin.

“Ozon is a growth story that has not yet reached a net profit or paid dividends. Securities of such companies may be more sensitive to deepening correction on the Russian stock market. Although we keep a positive view on the company and find its securities interesting for a portfolio if the market situation stabilizes. The price target is set at 3,055 rubles per receipt.”

Buylakova said that the pilot car sales project could boost sales of car makers and dealers.

“Given soaring sales of Chinese cars on the Russian market, the move could expand coverage of audience of the producers seeking to get a larger share of sales in the country. At that, we think purchases of cars on the marketplace may be few since expensive and complicated purchases require more assistance from the seller than smaller purchases,” the Finam analyst said.

Makhmudov at Ozon said it is too early to speak about results of the sales that have just started, but said the buying process will be no different from a purchase of goods of other categories.

“The client should choose a car from the available range in Chery’s online store, pay for it with the bank card tied to the account and pick a convenient time and place of delivery. A dealer center manager will deliver the car to the buyer at the indicated time, sign the necessary documents, and hand over the keys,” he told PRIME.

Makhmudov said that now choosing a car and its purchase takes place on Ozon, and the clients get a guaranteed recommended price, delivery by choice, and a user-friendly service.

“We are ready for cooperation with other representative offices of brands and dealer centers that think of additional channels of car sales. The list of the cities will grow along with coming to the platform of cars of other brands,” he said.

(100.4911 rubles – U.S. $1)

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