Steadying the ship

#themes: customer growth, stabilising costs, additional cash funding, adjusted EBITDA breakeven

Strategy overhaul positions Jumia on a sustainable path towards stronger customer growth and EBITDA breakeven: Jumia has materially reduced its losses from USD238m to USD99m in the past two years by exiting underperforming countries and businesses and reducing expenses. With lower currency volatility expected after steep devaluations in 2023 and 2024, Jumia can now focus on capitalising on its logistics platform as well as its regional expertise to boost customer growth. Cost consolidation in the past two years also positions Jumia to benefit from increasing economies of scale from higher customer growth leading to adjusted EBITDA breakeven in FY28e. Our base case indicates that Jumia is likely to remain loss-making at PAT level leading to a potential additional capital raise in FY27e. However, our blue sky scenario of 23% p.a. GMV growth could see Jumia break even in FY27e and forgo a capital raise. 

Revenue growth forecast of 14% p.a. driven by 15% p.a. acceleration in customers, 18% p.a. order growth and 15% GMV growth in our base case: We estimate a medium-term total addressable market (TAM) of 22m customers (5.4m Jumia users in FY24), but see blue sky potential of 380m customers as Jumia’s pick-up stations and JForce agents allow it to access customers that may not be connected to the internet. We forecast blue sky potential of 23% y/y growth in GMV p.a., a 26% y/y increase in orders and 23% y/y in revenue over our forecast period, compared to FY25e guidance of 10%-15% y/y and order growth of 15%-20% y/y. 

Customer growth key to improving unit economics: Jumia reduced fulfilment expense per order by 19% p.a. and sales, general and administrative expenses (SG&A) per order by 24% p.a. over the two years to 2024. We expect order growth of 18% p.a. to boost unit economics with fulfilment expense per order down 4% p.a. (up 13% p.a. in value) and SG&A 18% p.a. over our forecast period (-3% p.a. in value). This would enable adjusted EBITDA breakeven in FY28e, with a blue sky scenario of achieving breakeven in FY27e with 23% p.a. order growth.

GMV acceleration required to mitigate capital raise in FY27e: In our base case, Jumia’s liquidity position falls from USD134m in FY24 to USD6m by FY27e and turns negative in FY28e.  Our blue sky estimates indicate that with GMV growth of 23% p.a., Jumia may not need a capital raise.

Valuation range of USD1.9 – USD4.7 per share demonstrates upside optionality around future operational execution and growth potential: We use EV/sales exit multiple, EV/GMV and EV/EBITDA based on potential acquirers to value Jumia. Peers include Mercadolibre, Sea Ltd, Allegro, Pinduoduo, Alibaba, Takealot, Coupang and JD.com.  EV/sales multiple of 1.6x represents the bottom of the range and exit EV/EBITDA multiple of 22x represents the high end of the range. 

Upside and downside risks to our valuation:  Jumia is exposed to significant fx depreciation, inflation, and regulatory and macroeconomic risks. Increasing trade barriers in developed markets could improve supply from international vendors for Jumia but could also see increased competition in Africa from international players such as Temu and Shein. Due to lack of reliable data, we may be substantially underestimating the TAM potential in Africa.

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