China Government Promotes Green Economy, And ATRenew Stands Out As A Main Enabler

Core Insights - ATRenew Inc. (RERE) is China's largest pre-owned consumer electronics platform, reporting FY23 revenue of RMB12,965.8 million, a 31.4% year-over-year increase, indicating strong performance over the past three quarters [2] - The market reacted positively to RERE's earnings release, with a trading volume of 16 million shares, significantly higher than the average of 2 million shares, and a post-earnings surge of 27% [2] Financial Performance - Q4'23 revenue reached RMB3,873.6 million, up 29.9% year-over-year, driven by product revenue of RMB3,522.5 million (+31.1% YoY) and service revenue of RMB351.1 million (+19.7% YoY) [5] - RERE's revenue growth outpaced the market growth of 10% YoY in FY23, supported by increased transaction volume and improved take rates [5] - Operating loss in Q4'23 improved significantly to RMB16.7 million from RMB2,210.6 million in Q4'22 [5] Market and Industry Trends - The Chinese government is promoting a green economy, which aligns with RERE's mission and is expected to stimulate demand for recycling services [6] - The global refurbished and used mobile phone market is projected to grow, with RERE positioned to benefit from this trend [5] Strategic Partnerships - RERE's partnership with Apple has progressed well, generating RMB300 million in Q4'23, a 9x increase quarter-over-quarter, as RERE became Apple's third-party trade-in partner [7] - A significant percentage of iPhone users (59%) are likely to trade in their old phones when purchasing new ones, indicating a strong market opportunity for RERE [7] Expansion and Diversification - RERE's multi-category recycling services expanded to 252 AHS stores in FY23, achieving a GMV of RMB1 billion for non-electronic products [7] - The second-hand luxury goods market in China is booming, providing additional growth opportunities for RERE as it expands its offerings [8] Valuation and Future Outlook - RERE's stock is currently trading at 0.12x EV/Sales, with a target price of $2.5 based on a multiple of 0.25x EV/Sales, indicating a potential 60% upside [9] - The company is expected to continue delivering strong topline growth of 25% YoY in FY24 and aims to break even by FY25 [9]