ATRenew Reports Q1 Revenue Beat, Expects To 'Significantly Outpace' Broader Recycling Market

Shares of ATRenew Inc RERE came under some pressure even after the company reported a revenue beat for its first quarter, with the stock having climbed more than 74% over the past month.

Of the eight analysts that currently cover the stock, six have a bullish rating of either Buy or Outperform for ATRenew. The remaining two analysts have a neutral stance and maintain a Hold rating. The average target price is $3.15.

The company is well positioned in the pre-owned consumer electronics industry, observers note. It has also expanded across China to Japan and Europe.

Check out other analyst stock ratings.

ATRenew: Financial Data Highlights

China's premier electronics and goods recycling company reported total net revenue of RMB 3,651.1 million ($505.7 million). This not only represented 27.1% year-over-year growth but also came in around 2.5% higher than the consensus of $493.00 million.

Net product revenues grew by a healthy 28.5% to RMB 3,309.8 million, while net service revenues expanded by 15.1% to RMB 341.3 million.

ATRenew's non-GAAP operating profit stood at RMB 80.2 million ($11.1 million), driven by an expansion in non-GAAP operating profit margin to 2.2% from 1.5% in the first quarter of 2023. The company's earnings of 1 cent per share missed analyst expectations of 5 cents per share. 

"Both the scale of our self-operated retail business and the gross transaction value of our multi-category recycling service business grew robustly year over year. Driven by the action plans at China’s national and municipal levels, large-scale trade-in of consumer products has become an important way to promote domestic demand," CEO Kerry Xuefeng Chen said during the earnings call.

ATRenew's Multi-Category Business Expansion

The GMV (gross merchandise value) from the company's multi-category recycling business reached RMB 600 million ($82.96 million) in the first quarter. The results reflected an increase in the proportion of users engaging in cross-category repurchases. The quarter-over-quarter growth for this segment has consistently exceeded expectations.

The Trade-In Policy

Following the so-called “Action Plan for Promoting Large-scale Equipment Renewals and Consumer Goods Trade-ins,” several prefecture-level cities implemented their own local action plans.

ATRenew has leveraged this policy to secure high-quality first-hand supplies efficiently and at low costs.

Through premium recycling sources, such as AHS Stores, JD.com Inc JD, and Apple Inc AAPL, the company has significantly increased its recycling transaction order amount. Its recycling transaction order amount from JD.com grew by 43% year-over-year in the first quarter. The company became an official partner of Apple’s ‘Trade-in’ service in mainland China in June 2023.

Compliant Refurbishment

ATRenew has been investing to establish a robust supply chain to enhance its refurbishment operations. In the first quarter, the revenue from refurbished devices reached RMB 280 million ($38.7 million), boosting the company's share in the pre-owned consumer electronics recycling business.

Automation Advancements

Operational efficiency is a critical focus for ATRenew. In the first quarter, the non-GAAP fulfilment expense rate eased by 0.8% year-over-year. The company's investment in automation technologies has played a significant role achieving efficiency, allowing for more streamlined and cost-effective operations.

PJT Marketplace and Paipai Marketplace

The rising demand for cost-effective and high-quality pre-owned goods saw ATRenew’s 1P business recording 80% year-over-year growth in retail revenue through the Paipai Marketplace, AHS Stores, and online channels.

In the PJT Marketplace, the company is exploring more offline opportunities, leveraging its robust merchant service capabilities. Combining online and offline sales avenues boosts the company's market penetration and customer reach.

Management Outlook

ATRenew guided to total revenue between RMB 3,670 million and RMB 3,770 million for the second quarter, representing year-over-year growth of 23.8% to 27.2%.

"We believe that our primary growth driver in 2024 will continue to be our self-operated business, which contributes approximately 90% of our total revenues. Domestically, we expect the annual growth rate of our core self-operated business to significantly outpace the broader consumer market in 2024," CEO Kerry Chen stated.

RERE Price Action: Shares of ATRenew had declined by 3.41% to $2.55 at the time of publication on Wednesday.

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