1、Disclosures&Disclaimer:This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix,and with the Disclaimer,which forms part of it.DateSpotlightEquities|Food RetailFood Delivery:Winner takes allOctober 2019Play video withAndrew PorteousEquitiesFood RetailOct
2、ober 2019By:Andrew PorteousFood Delivery:Winner takes allLooking at the economics and growth potential of the Food Delivery sectorWe initiate on the European Food Delivery platforms:T,Just Eat and Delivery HeroWe compare marketplace economics with delivery and EM economics with DMT is our preferred
3、play;we initiate at Buy,EUR95 TP.We initiate Just Eat at Buy,830p TP and Delivery Hero at Hold,EUR42 TPSp Otlight 1 Equities Food Retail October 2019 In this report we expand our European Food Retail coverage to include the food Delivery Platforms:T;Just Eat and Delivery Hero.These companies are the
4、 major European plays on the increasing role of technology and ongoing blurring of channels in the food sector.The sector has clearly enjoyed rapid growth in recent years and in this report we look at the scale of the opportunity,what the companies need to do to address it and how viable the economi
5、cs are.Marketplace disruption of the takeaway food channel is well established,highly profitable and addresses a USD600bn+market globally(according to Uber).But addressing restaurant demand is a much greater opportunity and,with multi-vertical and the potential to disrupt the grocery market,the pote
6、ntial could be significant.However,we must keep an eye on the economics and delivery economics are extremely challenging in developed European markets.In this report we look at a number of critical factors that we expect to drive the sector going forward.We look at the monopolistic characteristics a
7、nd network effects of marketplace models and why this model offers attractive profitability at scale.We look at the challenges of delivery both from an ethical and economic perspective and note the major differences between developed and emerging markets.We conclude that the marketplace businesses a
8、re in the best position to deliver sustainable profits and as a result,T is our preferred play in the sector with our EUR95 TP implying over 30%upside.We have a Buy on Just Eat too which is linked to the proposed offer from T which we see as a sensible move for both companies.However,with Just Eat t
9、rading at a premium to the offer,the implied upside is not as great.Delivery Hero is the emerging markets play in the sector.As such it offers the greatest growth potential but with its markets being less well developed and highly competitive,particularly in LatAm and Asia,the future is far from cer
10、tain.Delivery Hero is doing the right things,focussing on customer growth and competing effectively,however this comes at a short-term cost and the route to sustainable,attractive profitability is harder to see at this stage.As a result,we initiate at Hold with our EUR42 TP implying only 7%upside.Wh
11、y read this report?We initiate on the European Food Delivery platforms:T,Just Eat and Delivery Hero,complementing our global coverage of Uber,Meituan Dianping and Naspers The sector is exposed to a significant growth opportunity;the key question is how attractive growth is.We compare marketplace eco
12、nomics with delivery and EM economics with DM T is our preferred play and we initiate at Buy with a EUR95 TP.We initiate on Just Eat at Buy,830p TP and Delivery Hero at Hold,EUR42 TP Andrew Porteous*,CFA Co-Head European Retail Research HSBC Bank plc +44 20 7992 4647*Employed by a non-US affiliate o
13、f HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Equities Food Retail October 2019 2 Pankaj Agarwala,CFA contributed to this report.Mr.Agarwala is employed by a non-US affiliate of HSBC Securities(USA)Inc.,and is not registered/qualified pursuant to FINRA regul
14、ations.Why read this report?1 Facts and figures 3 Executive summary 4 Where the European companies fit in 5 Key reports 6 A large,growing industry 8 Differing demand drivers between EM and DM 10 Multi-vertical the next opportunity?11 Market growth opportunity for each player 11 Business models 16 Ne
15、twork effects drive monopolistic characteristics 17 Conclusion 21 Delivery economics 23 The economics and ethics of the gig economy 28 Conclusion 30 Strategies EM vs DM 31 Moving into delivery 32 Conclusion 34 Attractive growth on offer 34 Greater certainty in DM,greater opportunity in EM 34 T well
16、positioned 35 T Eat merger should help both 35 Delivery Hero the EM play 35 European Company profiles 37 T 38 Just Eat 54 Delivery Hero 63 Global Company profiles 77 Meituan Dianping 78 Uber Technologies Inc 85 Naspers 89 Russian online food delivery 96 Disclosure appendix 105 Disclaimer 108 Content
17、s 3 Equities Food Retail October 2019 Facts and figures USD161bn Size of the home delivery market globally in 2017 USD471bn Size of the takeaway market globally in 2017 In the long run,the global food delivery market could be worth more than USD1trn.Urbanisation,smartphone penetration and demand for
18、 convenience are just some of the factors driving it.USD1trn Potential long-run size of the global food service delivery market Market-place Proven to be highly profitable at maturity Delivery Still evolving to make unit economics work Hybrid Creating moat around highly profitable marketplace USD120
19、bn Estimated combined total addressable market of the European listed players This represents around 20%of the global opportunity in our view.US and China are the largest global markets while Uber(through Uber Eats)and Meituan Dianping are primarily exposed EM vs DM Different demand drivers apply.Av
20、ailability of tech in early life cycle may boost EM growth further Gig economy Economics and ethics of the gig economy are central to the food delivery industry Equities Food Retail October 2019 4 The size of the food service delivery industry could be in excess of USD1trn in the long-term according
21、 to Ubers prospectus.Urbanisation,increased smartphone penetration and a heightened demand for convenience are just some of the factors that will drive demand growth.In this report,we examine the key drivers of demand,we examine the economics of the different business models being used and we identi
22、fy who we believe the major long-term winners will be.While there is increased demand from consumers to support growth,the underlying economics of different models are important.Marketplace models offer the most attractive economics but are potentially limited in their growth potential.Delivery mode
23、ls face more challenging economics,especially if“the gig economy”becomes more heavily regulated.A hybrid model may be the best route forward.We believe that these markets are natural monopolies given the powerful network effects present in the model.This is supported by M&A activity in the sector su
24、ch as Ts recent acquisition of Delivery Heros Germany business and Just Eat acquiring Hungryhouse.Market leaders need to be careful though and the contrasting approaches of Just Eat and T to delivery are a warning sign that even though the economics of food delivery are challenging,it may be importa
25、nt to offer this service.We initiate coverage on the following companies:T Buy EUR95 TP 33%upside Just Eat Buy 830p TP 32%upside Delivery Hero Hold EUR42 TP 7%upside We believe T offer best in class execution and the lowest risk given its leading market positions.It is profitable in the Netherlands
26、and swift integration of the recently acquired Delivery Hero Germany business bodes well for a rapid move into profitability in what is a very large market.Just Eats fortunes are now tied to those of T following the recent,recommended offer for Just Eat by T.We believe the combination makes sense.Ec
27、onomies of scale in technology support synergy potential but more importantly,T should bring strategic clarity to Just Eat,something that has been sorely needed over the past 12 months.Executive summary The global food service delivery market could grow to USD1trn in the long-term.We look at the key
28、 drivers of demand and key players Markets tend to be natural monopolies with recent M&A clear evidence there is little value in being an also ran The T Eat planned merger could create a dominant European platform,while Delivery Hero offers EM growth The food delivery industry offers significant gro
29、wth potential But it is important to focus on underlying economics to understand the viability of growth T is our preferred play 5 Equities Food Retail October 2019 Delivery Hero is now largely an Emerging Markets play,this carries the greatest risk and also opportunity.It has a large,somewhat spraw
30、ling portfolio of 39 markets,where it is a leader in 31.This seems to be gradually being focussed down,which is a good thing.However,the path to profitability is unclear in markets such as LatAm and Asia where competition is tough and the market is evolving rapidly with high penetration of delivery
31、services and increasing moves by competitors into“multi-vertical”models which deliver a broader range of products and services.Overall we are attracted by the growth on offer in the space and proven profitability of marketplace models.Delivery offers attractive growth potential but brings with it up
32、front investment and in most developed markets an unclear path to profitability.Nevertheless,given the underlying fundamentals of the markets to which they are exposed we broadly see the companies pursuing a strategy we agree with.But prefer Ts greater certainty to Delivery Heros greater potential.T
33、his initiation builds on our global coverage of food delivery where our coverage also includes:Meituan Dianping Buy HKD111 TP 24%upside(Binnie Wong)Naspers Buy ZAR2,554 TP 14%upside(Ziyad Joosub)Uber Buy USD44.00 TP 51%upside(Masha Kahn)Yandex Buy USD48 TP 35%upside(Masha Kahn)Mail.ru Buy USD30 TP 4
34、5%upside(Masha Kahn)Where the European companies fit in The European companies offer a different proposition to the rest of our global coverage.The main difference to the likes of Uber and Meituan Dianping is that they all began life as marketplace offerings.This is a far more profitable endeavour t
35、han delivering food directly and as a result all of our companies have fairly well developed profit centres(UK for Just Eat,Netherlands for T and MENA for Delivery Hero).The European companies play in most European markets,MENA and smaller Asia and LatAm markets,as shown on the map overleaf.They by
36、and large do not compete in the large markets in the US and China where Uber and Meituan are respectively present.However,importantly,they generally have leading positions and in the case of their key markets,largely monopolistic positions.For T this is the Netherlands,although Germany is well on th
37、e way to being a similar situation and it is also dominant in Belgium.For Just Eat,the UK is a highly profitable market where it is by some distance the market leader,although has some work to do to regain momentum.Delivery Hero is present in many markets,41 in total where it is the leader in 31,but
38、 MENA is the most attractive part of the business.Here DH is highly profitable with dominant market positions.Delivery Hero is the key EM play but carries more risk Our initiations fit into HSBCs global coverage of the sector European markets are very different to US and EM markets Equities Food Ret
39、ail October 2019 6 Key reports Alibaba:Earnings upside from reducing losses in new initiatives,24 September 2019 Uber and Lyft:Upgrade to Buy:Price is right to take the ride,16 September 2019 Spotlight:Uber and Global Ride-Hailing 22 July 2019 Meituan Dianping Initiate at Buy:A super app for Chinas
40、lifestyle services 24 October 2018 Progress is always precarious,but cannot happen without change 5 August 2019 Food Delivery M&A 30 July 2019 Yandex Initiate at Buy:Search no further,free Taxi is here 5 November 2018 HSBC comparable valuation(calendarised)Current M/Cap Target _EV/Sales(x)_ _EV/EBIT
41、DA(x)_ _PE(x)_ FCF Yield(%)_Divi yield(%)_ Stock Ticker Rating Curr price Loc.Cur.Bn price 2019e 2020e 2019e 2020e 2019e 2020e 2019e 2020e 2019e 2020e Food Retail companies Ahold Delhaize AD.AS Buy EUR 22.24 26.3 24.00 0.42 0.39 5.0 4.5 13.4 11.9 11.3 11.6 3.5 3.8 B&M BMEB.L Buy GBp 347 3.5 430 1.01
42、 0.89 11.7 10.0 16.4 13.7 4.1 6.0 2.4 2.9 Carrefour CARR.PA Buy EUR 14.94 12.1 21.00 0.18 0.17 3.8 3.4 12.8 11.5 12.2 13.4 3.5 4.0 Colruyt COLR.BR Reduce EUR 49.30 6.8 40.00 0.69 0.66 8.7 8.4 18.6 18.4 3.2 3.6 1.9 1.9 Jeronimo Martins JMT.LS Hold EUR 15.05 9.5 14.00 0.52 0.50 9.1 8.7 21.7 20.1 2.2 2
43、.3 2.2 2.3 Marks&Spencer MKS.L Reduce GBp 164 3.2 150 0.43 0.42 4.2 4.1 8.3 9.1 17.2 15.8 7.2 6.8 Metro AG B4B.DE Hold EUR 14.22 5.1 16.00 0.24 0.24 5.1 5.4 12.5 14.1 10.3 8.8 4.9 4.9 Morrisons MRW.L Buy GBp 193 4.6 220 0.32 0.30 6.0 5.7 14.3 13.1 7.2 8.7 6.6 7.2 Ocado OCDO.L Reduce GBp 1295 9.0 900
44、 4.88 4.55 nm nm nm nm-3.4-4.3 0.0 0.0 Sainsburys SBRY.L Reduce GBp 202 4.5 180 0.20 0.19 3.8 3.9 10.3 10.3 11.4 13.4 5.5 5.6 Tesco TSCO.L Hold GBp 227 22.3 250 0.37 0.35 4.9 4.4 14.0 12.2 11.7 13.4 3.6 4.1 Sector average*0.38 0.36 5.5 5.1 14.3 13.2 10.0 10.7 3.7 4.0 Food Delivery companies Meituan
45、Dianping 3690.HK Buy HKD 89.45 471.6 111.00 4.91 3.66 178.8 42.6 nm 94.5-0.6 1.2 0.0 0.0 Delivery Hero DHER.DE Hold EUR 39.30 7.4 42.00 5.18 3.20 nm nm nm nm-4.9-2.8 0.0 0.0 Just Eat JE.L Buy GBp 631 4.3 830 3.42 2.77 21.7 15.6 43.3 31.2 1.6 4.9 0.0 0.0 T TKWY.AS Buy EUR 71.35 4.4 95.00 10.54 7.59 2
46、59.8 55.6 nm 185.2-0.2 1.6 0.0 0.0 Sector average*5.16 3.79 156.3 37.6 nm 84.8-0.8 1.1 0.0 0.0 Other tech companies Lyft LYFT.O Buy USD 38.20 10.7 62.00 1.76 1.40 nm nm nm nm-21.3-21.3 0.0 0.0 Mail.Ru MAILRq.L Buy USD 20.70 280.5 30.00 2.82 2.26 8.2 6.5 34.1 28.6 7.9 12.3 0.0 0.0 Naspers NPNJn.J Buy
47、 ZAR 2240 73.7 2554 12.19 9.18 nm nm 23.4 19.5-1.1-1.1 0.0 0.0 Uber UBER.N Buy USD 29.07 49.4 44.00 2.03 1.64 nm nm nm nm-21.5-15.4 0.0 0.0 Yandex YNDX.OQ Buy USD 35.66 669.8 48.00 3.12 2.25 12.5 8.7 26.0 18.6 2.7 3.8 0.0 0.0 Sector average*7.15 5.43 11.3 8.1 24.2 19.8-8.8-6.6 0.0 0.0 Source:HSBC es
48、timates,priced as at close 9 October*market cap weighted;average excludes Ocado and B&M 7 Equities Food Retail October 2019 Global food delivery markets Source:HSBC Uber Eats in top two positionsUber challengingUber Eats not present but Uber isUber Eats or Uber not presentUSDominant:DoorDashChalleng
49、er:GrubHub,Uber Eats,Postmates,OtherUKDominant:Just EatChallenger:Deliveroo,Uber EatsIrelandDominant:DeliverooChallenger:Just Eat,Uber EatsPortugalDominant:Uber EatsChallenger:Glovo,noMenu,Comer em Casa,Comidas.ptGermanyDominant:TakeawayRussiaDominant:Delivery ClubChallenger:Yandex.FoodChinaDominant
50、:Meituan DianpingChallenger:Ele.meAustraliaDominant:Uber EatsChallenger:Just Eat,Deliveroo,DoordashSouth KoreaDominant:Baedal MinjokChallenger:Delivery Hero,Shuttle,Pick Your DishUAEDominant:DeliverooChallenger:Uber Eats,MathaqiSaudi ArabiaDominant:Delivery HeroChallenger:Uber Eats,MathaqiJapanDomin
