HSBC upgraded its rating on ride-hailing giant Grab to a “buy” on attractive valuations and “intact” growth drivers, while Maybank maintained its buy rating.
On Tuesday (Feb 4), its analysts said that the decision to upgrade Grab from a “hold” rating comes as the price correction in the stock has made its valuation “attractive”. Grab shares fell 15 per cent over the past two months.
“We continue to think Grab should be able to strengthen its leadership position in key categories (ride-hailing and deliveries) due to its ability to continuously roll out innovative and affordable products,” said HSBC.
But they trimmed the target price for Grab to US$5.45 from US$5.50, on lower margin estimates with gross merchandise value growth likely to be prioritised. That is 19.5 per cent above its latest share closing price of US$4.56.
HSBC predicts “robust” growth for Grab’s on-demand gross merchandise value at a 14 per cent compound annual growth rate from 2024 to 2026. That would be driven by growth in monthly transacting users and higher frequencies of transaction.
“The company’s investment into various products will help to expand its total addressable market with more affordable solutions, and margins will improve with increased contribution from high-value offerings, scale and advertising revenue,” the HSBC Global Research team said.
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Given these factors, the HSBC Global Research team forecasts a 66 per cent rise in the company’s earnings before interest, taxes, depreciation and amortisation (Ebitda) to US$533 million for 2025 from US$322 million for 2024. This comes ahead of the company’s upcoming earnings announcement for its fourth quarter and full year, which will be released on Feb 19 after the US market closes.
The HSBC Global Research team also estimates that Grab’s Q4 FY2024 adjusted Ebitda will expand 17 per cent on the quarter to US$106 million on the back of GMV growth of 22.5 per cent for its mobility segment and 15 per cent for its delivery segment.
Potential Grab-GoTo merger
Maybank reiterated its buy call on Grab, saying a potential merger between Grab and Indonesia’s ride-hailing giant GoTo could bring about a “near-monopolistic presence in Indonesia with (an) 80 to 90 per cent market share and an increased dominance in Singapore”.
That could bring about regulatory challenges, the bank said.
But even if there is no such deal, Maybank maintains its “buy” call for Grab, he said. “We see firm macro conditions and benign competition allowing for low mid-teens on-demand GMV growth while initiatives like ads, groceries and fintech create new growth and monetisation avenues,” its analysts said.
Maybank added that the dominance of a merged company would limit price increases due to regulatory scrutiny and could yield synergies from better operational efficiency stemming from improved driver utilisation and reduced fixed costs.
“A merger… (could) increase the merged company’s margin to 5.5 per cent by FY2027… we (could) see an Ebitda upside of US$106 million to US$209 million over FY2026 to FY2027 versus our current assumptions,” Saifee said.
