Performance summary: In 2021H1, JD Logistics achieved revenue of 484.7 billion yuan, a year-on-year increase of 53.7%, total operating cost of 46.7 billion yuan, a year-on-year increase of 69.9%, gross profit of 1.77 billion yuan (-56.4%), gross profit of 3.7%, a year-on-year decrease of 9.2pp. 21H1 lost 15.21 billion yuan, mainly due to a loss of 12.8 billion yuan in the fair value of convertible preferred shares after listing. If one-off projects were excluded, the net loss of non-IFRS of 1.5 billion yuan was excluded, a year-on-year decrease of 175.7%. The main reason for the increase in JDL's losses in the first half of the year was that the company accelerated its business expansion. New business development and network expansion all required capital investment, causing the company's fixed costs to be too high.
In terms of revenue, JD Logistics has achieved high growth under a high base.
1) Looking at customer sources, 21H1's external customer revenue reached 26.5 billion yuan (+109.6%), accounting for 54.7% of total revenue. In 2020, external customer revenue accounted for 46.6%. The share of external customer revenue increased year by year, and the company's opening-up strategy achieved remarkable results.
2) Looking at the revenue structure, 21H1 integrated supply chain customer revenue was 33.6 billion yuan, accounting for 69.4%, of which revenue from external integrated supply chain customers was 11.7 billion, an increase of 65.6% over the previous year. The number of integrated supply chain customers reached 59,000, an increase of 58.7% over the previous year. An increase in the share of external customers and integrated supply chain customers indicates an increase in customer acceptance and stickiness to the company's business.
Looking at costs and profits, profits are under pressure during periods of high investment. The total cost of 21H1 was 46.7 billion yuan (+69.9%). The cost increase was mainly due to the increase in production input costs and the impact of temporary epidemic subsidies on 20H1. Of the total cost, employee welfare expenses were 17.2 billion yuan, an increase of 49.6% over the previous year, mainly due to an increase in the number of relevant employees; outsourcing expenses were 12 billion yuan, up 93.9% year on year. This cost increase was mainly due to the increase in demand for outsourcing business caused by increased external business and the impact of acquisitions exceeding express transportation; rent costs were 4.5 billion yuan, up 9.3% year on year. The capital expenditure of 20H1, 20H2, and 21H1 was: 1,400 million yuan, corresponding to JD Logistics's continuous investment in leasing production capacity such as warehouses, sorting centers and distribution stations at the end of the quarter. The number of operating warehouses reached 1,200. Overall, JD Logistics's 21H1 revenue/cost scale is expanding rapidly, and profit margins are under pressure from strategies that focus on business volume and market share growth. It is expected that profit levels will pick up during the e-commerce peak season in the second half of the year.
Profit forecasts and investment recommendations. We are still concerned about the long-term variables in the development of JD Logistics: fluctuations in traffic to the main site of the JD Mall; the market risk of new business expansion; and the mismatch between the present and the future, cash flow, and capital expenditure. Investment logically focuses on the short, medium, and long term: ① The short term depends on whether the company grasps the JD Group's traffic dividend. The government's anti-monopoly control of e-commerce platforms will lead to a repricing of traffic entry/traffic costs, opening up the possibility for JD to acquire external traffic. ② In the medium term, focus on JD Logistics's ability to integrate supply chain modules. JDL continues to expand and integrate the supply chain in terms of temperature, geography, weight, and model, with the warehousing and distribution business at its core. ③ Long-term attention has been paid to the company improving the intelligence level of logistics modules through the accumulation of industry KnowHow capabilities to provide independent third party big data and logistics technology solutions to external companies.
We expect JD Logistics's revenue from 2021-2023 to be 1,057, 1479, and 2012 billion yuan respectively, and non-IFRS profits/losses of -29, -1.6, and 600 million yuan respectively. Corresponding to current PS of 1.2, 0.9, and 0.6 times, respectively, it will maintain the “hold” rating.
Risk warning: A sharp slowdown in package volume, the risk of rising labor costs, the risk of developing new businesses, and the risk of intensification of e-commerce competition.