JD Logistics announced its 2021 semi-annual results, and revenue continued to grow rapidly. In 2021, H1 achieved revenue of 48.4 billion yuan, an increase of 53.7% over the previous year; the loss was 15.36 billion yuan, mainly a one-time loss of 12.84 billion yuan due to changes in the fair value of convertible and redeemable preferred shares after the company went public. The adjusted net profit loss was 1.5 billion yuan, and adjusted net profit was achieved in the same period in 2020 of 1.98 billion yuan.
External customers account for more than 50% of revenue, and the growth rate of integrated supply chain business has reached 30%. In 2021, H1's revenue from external customers was 26.5 billion yuan, an increase of 109.6% over the previous year, accounting for 54.7% of revenue.
According to estimates, the integrated supply chain revenue of external customers reached 11.7 billion yuan, an increase of 65.6% over the previous year. The number of external customers in the integrated supply chain reached 59,067, an increase of 58.7% over the previous year, an increase of 12.2% over the end of 2020. The average revenue of a single customer increased to 19,700 yuan, an increase of 4.4% over the previous year, and customer stickiness further increased. Other business revenue from external customers reached 19.9 billion yuan, an increase of 164.8% over the previous year, mainly due to the consolidation achieved by Expedited Express and the growth of the Express Express business. Revenue from the JD Group's integrated supply chain business reached 22 billion yuan, an increase of 16.2% over the previous year.
Continued strengthening of logistics network capabilities and reduced government support led to a decline in short-term profits. The operating cost of H1 in 2021 was 46.7 billion yuan, an increase of 69.9% over the previous year, which was higher than the revenue growth rate. The gross profit margin was 3.7%, a decrease of 9.2 percentage points over the previous year. The adjusted net profit loss was 1.5 billion yuan, turning into a loss over the previous year. Mainly because from the second half of 2020, the company continued to invest in strengthening the logistics network, including increasing the number of operators, warehouse space, transportation routes and other basic logistics facilities. The capital expenses of 2020H1, 2020H2, and 2021H1 companies were 1,400, 1.8 billion yuan, and 1.6 billion yuan respectively. In addition, government subsidies and concessions related to the pandemic have been reduced.
Supply chain business continues to grow, and warehousing network+technology empowers two-wheel drive. The company continues to cultivate in the six major industries of FMCG, clothing, home appliances and furniture, 3C, electronics, and automobiles, deepening cooperation with leading customers and continuously accumulating industry experience and solution capabilities. In June 2021, the company further deepened cooperation with Xiaomi Youpin, expanding from standardized transportation services to integrated supply chain services. At the same time, the standardized supply chain optimization product “Jinghui” was launched to help small and medium-sized customer groups rapidly improve supply chain efficiency. As of 2021 H1, the company's managed storage area (including cloud warehouses) reached 23 million square meters, and managed more than 2,600 warehouses (including cloud warehouses), leading the country. The company has always attached importance to the important role of logistics technology innovation. The North China region has set up new warehouses in Beidou to further upgrade intelligent warehousing capabilities.
Future highlights: Looking inside and JD's ecological positive cycle, looking outwardly, the digitally intelligent supply chain market set sail in the wind. 1) Strongly guarantee that the Group's retail business continues to grow internally and has become one of the core competitive barriers. The JD ecosystem also supports JD Logistics exports and stabilizes commercial flow. 2) Externally, integrated supply chain services bring cost reduction and efficiency to brand enterprises and manufacturers. We believe that the B-side market is in a period of huge dividend strategy, and the company is expected to grow with the times.
Investment suggestions: 1) Profit forecast: Based on losses of $12.8 billion due to changes in the fair value of convertible and redeemable preferred shares and performance pressure brought about by investment, we adjusted our earnings forecast for 2021-23 to net profit attributable to -163.5, -17.1, and 240 million yuan (the original forecast was -38.1, -11.0, 670 million yuan). 2) Investment advice: The company is currently in a period of business expansion. It is guided by prioritizing shares rather than pursuing short-term profits. We use the PS method for valuation. Referring to UPS, we give 1.5 times the PS valuation in 2022. The target market value for the one-year period is about HK$236.8 billion, corresponding to the stock price of HK$38. It is expected that there is 40% room from the current price to maintain the “recommended” rating.
Risk warning: JD's growth rate is lower than expected, third-party business expansion is lower than expected, and labor costs have risen sharply.