Dada Earnings: Questions Linger Despite Addressing Revenue Irregularities; Governance Risks Remain

We maintain our fair value estimate for Dada Group at $3 after the company reported revenue of CNY 2.75 billion for the fourth quarter of 2023, representing only a 3% increase year on year. Dada addressed the key issue of overstating its revenue from online advertising services for the first three quarters of 2023 and restated its previous income statement, by removing CNY 500 million in offsetting revenue and costs. The result of the rectification revises revenue growth down to 12% year on year for 2023, which suggests that the monetization rate was much lower than previously indicated, given that gross merchandise volume, or GMV, was not overstated. Dada declined to provide details on the monetization rate and stopped disclosing GMV data. As such, we lower our monetization rate by 150 basis points, and we reduce GMV growth to only midteens in the next three to five years, down from high teens, to account for the uncertainty. Given the lack of transaction data and the recent irregularity in its income statement, we believe Dada carries plenty of corporate governance risks until it can provide better transparency.