After A Stellar 2020, New Growth Catalysts Emerge For Dada Nexus

Resulting from its Nasdaq IPO in June and follow-on offering in December, the JD.com-affiliated O2O company found itself with sufficient cash on hand to keep expanding in the ample Chinese market.

Dada delivery rider

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On March 8, Dada Nexus (DADA:NASDAQ), a company operating on-demand retail and delivery platforms in China, posted its unaudited financial results for the fourth quarter of 2020. The firm's annual revenue hit CNY 5.74 billion (around USD 881 million), up a staggering 85.2% year-on-year. On the next day, its Nasdaq stock soared 11.04%, propelled by a combination of solid financials and a marketwide stocks pullback.

Meanwhile, there have lately been a number of bellwethers signaling the company's undervaluation. For one, BNK Invest – in a note on Nasdaq's website – suggested that DADA's stock is currently oversold, with its Relative Strength Index (RSI) diving below 30. Less than one year since its IPO, the firm comes off as yet undiscovered by many in the investment space.

In November 2020, we analyzed Dada's competitiveness via its network and business models, as well as the key trends in the Chinese local on-demand retail and delivery industries. This article discusses the status quo of the company through the prism of financial analysis, also digging into Dada's strategic layout, plans and possible market developments. To approach these matters in a systematic way, we first take a quick glance at the duet of Dada's platforms – JDDJ (or JD Daojia) and Dada Now.

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'Bringing People Everything on Demand'

Following the above motto, Shanghai-headquartered Dada has been developing two core businesses:

JDDJ, e-commerce titan JD.com's (JD:NASDAQ, 09618:HK) ex-spinoff that merged with Dada in 2016, is a local on-demand platform that connects retailers and brand owners directly with consumers. Besides groceries, its main legacy segment, JDDJ has now also extended its tentacles into a few red-hot FMCG categories like cosmetics and over-the-counter drugs, extensively partnering with national and regional chains. Furthermore, it has started to leverage JD's prowess in consumer electronics and reportedly inked a partnership with vivo, the world's fifth-largest smartphone maker by shipments, according to IDC, a technology researcher.

JDDJ had covered around 1,400 cities and counties in China by the end of 2020, per Dada's CEO Philip Kuai. Referring to data from Chinese consultancy iResearch, Mr. Kuai stated during the earnings call that JDDJ increased its share in the supermarket segment of the domestic on-demand retail market from 21% in 2019 to 25% in 2020.

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