Technology: 2025 Outlook: Solid growth outlook with better fundamentals, and the rise of fintech infrastructure (OVERWEIGHT)

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Technology

2025 Outlook: Solid growth outlook with better fundamentals, and the rise of fintech infrastructure

Google projects the internet economy GMV to grow at a 14% CAGR in FY24-30, driven by social media, AI, and fintech amid low penetration.
Positive CM trends reflect improved cash burn control and marketing costs, as players balance competition and service adoption.
We maintain an OW rating, supported by solid GMV growth and improving EBITDA margin-to-GTV trajectories; our top pick is GOTO.

Internet Economy: Building Diverse and Resilient Ecosystems

The internet economy GMV is set to grow at a 14% CAGR (2024–30), based on the Google report. Low e-commerce penetration (our estimate of ~17%), democratization of online services via social media, AI and fintech will be the key growth drivers, in our view. Positive trends in Contribution and EBITDA margin to GMV highlight better cash burn and OPEX alignment with GMV.

E-commerce: Optimizing Levers to Democratize Growth

We expect e-commerce GMV will grow further through the trifecta of social media, consumer credit and AI-led productivity democratizing and deepening e-commerce. The current trends will sustain the recovery from the dip in 1Q24 and further improve contribution margins CM (3Q24 range: 1.1%–3.9% of GMV) and EBITDA margins (0.4%–2.1% of GMV). TikTok and Shopee lead in social commerce, with TikTok outpacing Shopee in app downloads and usage penetration. Lazada and Blibli will aim to enhance fulfillment and TPV mix.

ODS: Sustained GMV Growth expecting uptrend in margins

ODS GMV expansion is fueled by product diversification across segments and enhanced customer stickiness via subscription-based models. The near duopoly market between Gojek and Grab is characterized by yoy growth in MTUs, with robust conversion and retention in monthly app downloads, averaging ~1mn. Hence, we expect ODS CM (3Q24 range: 1.1%–4.8% of GMV) and EBITDA margins (0.1%–1.9% of GMV) to trend upward in FY25.

QRIS and Paylater Adoption and the Rise of Modern Financial Infrastructure

QRIS saw transactions growing +227% yoy, highlighting Indonesia's rapid digitalization. Google projects digital payments to grow at a 14.9% CAGR to $900bn by 2030 and 34.6% CAGR for digital lending. Indonesia’s Paylater balance of Rp30tr is a fraction of the total adj. consumer loans of Rp2,018tr, highlighting penetration upside. ShopeePay and GoPay funnels show robust traction, with monthly downloads (2.7mn/1.8mn in Nov24) and expansion into offline transactions. GoPay and Indian Paytm delivered positive CM and near-positive EBITDA in 3Q24, implying their models are potentially sustainable. Cloud-native platforms may capitalize on this momentum to build a modern financial technology infrastructure.

Maintain Sector OW: Scaling Fundamentals with Fintech and AI

The internet space remains attractive, with e-commerce as the prime driver of GTV growth, supported by social media & AI catalysts that will also uplift other pillars, ODS and fintech. The sector is therefore poised for 2-digit GTV growth. Current CM and EBITDA trajectories suggest that scalability can further strengthen fundamentals. Fintech emerges as a formidable pillar, leveraging insights from tech platforms to unlock valuation upside. We maintain sector OW, with GOTO (Buy, TP Rp90) and BELI (Buy, TP Rp520) capitalizing on their unique strengths to solidify their positions in an evolving landscape. Key risks include new entrants and intensified competition.

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